3.53% Dividend Yield to Buy for Decades of Passive Income!

It may not seem like that much, but add in returns, and this top stock provides dividends for decades.

Amy Legate-Wolfe ❯

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest.

Published November 20, 2024 4:30 pm EST

Manulife Financial (TSX:MFC) may not offer the highest dividend, yet it shines as a long-term pick for passive income, especially with recent earnings signalling robust performance. Today, let’s get into why I’d still pick up this top stock for decades of passive income.

Into earnings

In the latest earnings report for the third quarter (Q3) of 2024, MFC posted a revenue of $9.78 billion, reflecting a solid 17% increase from the same quarter last year. Its net income also rose to $1.78 billion, marking an impressive 86% increase from Q3 2023. This growth led to a profit margin boost, now at 18% compared to 12% last year. Such figures hint at MFC’s strength and stability, qualities that long-term passive-income investors cherish.

Earnings per share (EPS) also leaped, with Q3 2024 EPS reaching $1.01, up from $0.53 a year earlier. This rise in EPS showcases MFC’s ability to generate higher returns for shareholders, a promising signal for dividend investors. Additionally, MFC’s dividend yield sits at a competitive 3.53%, delivering reliable payouts supported by the company’s steady growth. Manulife’s dividend consistency, combined with strong revenue and EPS growth, is what makes it an appealing choice for those looking to build passive income over time.

Still valuable

MFC’s valuation metrics further underscore its appeal to value-conscious investors. Its price-to-earnings (P/E) ratio currently stands at a forward P/E of 11.21, positioning it attractively within the insurance industry. Manulife’s price-to-book (P/B) ratio is 1.83, a favourable metric compared to its peers. This suggests the stock might be trading below its intrinsic value. Value stocks like MFC offer great entry points for long-term investors, particularly when their financial health and growth prospects are as solid as MFC’s.

Looking at its growth potential, analysts forecast MFC’s revenue to expand by 17% annually over the next three years, outpacing the 8.4% growth expectation for Canada’s insurance sector. This ambitious growth projection reflects MFC’s robust international presence, particularly in high-growth markets across Asia. Manulife’s operations span Canada, the U.S., and Asia, where rising demand for insurance and wealth management services provides a steady income stream and growth opportunities for the future.

Stability

In terms of balance sheet health, MFC is well-positioned with $28.8 billion in cash. This strong cash reserve not only supports its dividend payouts but also enables Manulife to invest in growth initiatives, reinforcing its competitive stance. Despite a debt-to-equity ratio of 42.49%, MFC’s cash flow from operations provides more than enough to cover its obligations and dividend commitments.

Momentum investors also find MFC appealing. The stock’s recent 7.9% rise over the past week and a 4.6% increase over the past month indicate strong interest in the market. MFC’s consistent performance, including a 70% gain over the past year, highlights the appeal of its stock in the current economic climate. High-performing stocks with such momentum often signal market confidence. This can be a great advantage for new investors considering MFC.

Safety in numbers

MFC’s dividend track record is another plus. The company has a history of raising dividends, and with a payout ratio of 55.5%, it retains room to grow these payouts in the future. Investors who prioritize steady income will appreciate MFC’s reliable dividend schedule, with its upcoming ex-dividend date on November 19. Regular income from dividends is the cornerstone of passive income investing, and Manulife’s performance shows it’s committed to rewarding shareholders.

With a beta of 1.06, MFC exhibits moderate volatility, aligning well with long-term investment goals for income-focused investors who seek stability alongside growth. The stock’s current valuation and growth potential strike a great balance for those looking to hold onto a steady, growth-oriented investment. Its steady revenue growth and market presence mitigate risk while still offering a growth trajectory, even during economic shifts.