When it comes to choosing the best blue-chip stocks out there, two that pop up are Canadian Imperial Bank of Commerce (TSX:CM) and Manulife Financial (TSX:MFC) on the TSX. Investors often weigh factors like recent earnings, stock performance, and dividend yields. So let’s delve into these aspects to determine which might be the better buy.
Into earnings
Investing in financial stocks requires a careful analysis of a company’s financial health, market performance, and growth prospects. CIBC, one of Canada’s leading banks, and Manulife, a prominent insurance and financial services provider, are both significant players on the TSX. Understanding recent performances can guide investors in making informed decisions.
As of the latest earnings report, CIBC reported a profit margin of 29.6% and an operating margin of 39.9%. The bank’s return on equity stood at 12.4%, indicating efficient use of shareholders’ equity to generate profits. In the trailing 12 months, CIBC achieved a net income of $6.5 billion, with diluted earnings per share (EPS) of $6.91.
Manulife, on the other hand, reported a profit margin of 17.4% and an operating margin of 21% as of June 30, 2024. The stock’s return on equity was 10.4%, with a net income of $4.2 billion and diluted EPS of $2.35 over the same period.
What you get
So what has growth in returns and dividends been like for the two stocks? Over the past year, CIBC’s stock has experienced significant growth, with a 52-week range between $51.43 and $88.56, reflecting a 69.3% increase. The stock’s beta over five years is 1.1, suggesting slightly higher volatility compared to the broader market. Manulife’s stock also showed robust performance, with a 52-week range from $24.90 to $42.52, marking a 62% increase. The five-year beta for Manulife is 1.1, indicating volatility close to the market average.
CIBC offers a forward annual dividend rate of $3.60, yielding approximately 4.1% at writing. The bank has a payout ratio of 51.7%, thus suggesting a balanced approach between rewarding shareholders and retaining earnings for growth. Manulife provides a forward annual dividend rate of $1.60, resulting in a yield of about 3.9%. With a payout ratio of 65.1%, Manulife allocates a larger portion of its earnings to dividends. This may appeal to income-focused investors.
More to come
Finally, let’s compare the two stocks in terms of value and growth prospects. CIBC’s trailing price-to-earnings (P/E) ratio is 12.7, with a forward P/E of 11.6, indicating investor expectations of earnings growth. The price-to-book (P/B) ratio stands at 1.6, suggesting the stock is trading at a premium to its book value. Meanwhile, Manulife’s trailing P/E ratio is 17.5, with a forward P/E of 10.3, reflecting anticipated earnings improvement. The P/B ratio is 1.7, indicating a similar premium to book value as CIBC.
As to CIBC’s quarterly revenue, it saw growth year-over-year of 19.6%, with quarterly earnings growth of 25.6%, highlighting strong recent performance. Manulife reported quarterly revenue growth of 12.8% and earnings growth of 1.7%, indicating steady but slower growth compared to that of CIBC.
Considerations
There are a few risk factors to consider before diving in as well. CIBC’s significant exposure to the Canadian housing market presents potential risks. Especially if economic conditions lead to increased mortgage defaults. Manulife’s global operations, particularly in Asia, offer diversification. Yet also expose the company to geopolitical and currency risks.
Analysts suggest that both stocks have enjoyed substantial rallies over the past year. However, some analysts express caution, advising investors to consider potential economic risks in Canada when evaluating these stocks.
Bottom line
Both CIBC and Manulife have demonstrated strong financial performance and offer attractive dividend yields. CIBC’s higher profit margins and recent earnings growth may appeal to investors seeking robust financial metrics. Manulife’s global presence and slightly higher dividend payout ratio might attract those looking for international exposure and income. Ultimately, the better buy depends on individual investment goals, risk tolerance, and market outlook, as both are solid options on the TSX today!
