Enbridge (TSX: ENB) is one of the most powerful dividend growers in the entire Canadian stock market, but it’s hard to be a net buyer of the dip at a time when the TSX Index seems more than willing to continue its red-hot run well into year-end. Despite the latest 11.5% drop, shares are still too expensive for my liking, especially when you consider the latest Raymond James downgrade.
In short, shares of ENB are fantastic, and the 5.4% dividend yield is one of the most stable foundations in the entire energy sector. That said, I’d much rather wait for the dust to settle than jump into the deep end, especially since the stock was long overdue for a bit of a breather after a steady rally off the depths of mid-2023.
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Manulife Financial
In the meantime, I think value-focused investors might have more to like in a name like Manulife Financial (TSX: MFC), which, despite soaring nearly 74% in the past two years, still goes for a very reasonable price of admission of 13.7 times forward price-to-earnings (P/E). Indeed, whenever you have a dirt-cheap multiple alongside steady, long-lasting momentum, you might have a steady Eddie with solid tailwinds that can really deliver on the total return front.
Of course, the dividend yield is a rather modest 3.2%, more than 2% less than the likes of Enbridge. But, at the same time, Manulife is making good use of AI to help jolt ROIs. And, in my view, the company’s willingness to explore the value to be extracted from such technologies warrants a more premium price tag. Combined with the growth out of Asia, it’s hard not to like Manulife, even after its latest quarterly result saw some subtle pressures from the Canadian market.
As shares look to find direction after blasting off in recent years, I do think that the big question is what happens when Canada gets back to full speed while the Asian segment continues to fire on all cylinders. Indeed, it might be difficult to keep the shares from marching higher as past efforts look to pay real dividends in a huge way. Any way you look at it, I think the rise of generative AI stands to benefit the life insurers greatly.
The AI tailwinds are very real
Indeed, underwriting insurance policies seems best done by a powerful AI model that’s well-grounded in the data. As the company’s AI underwriting engine continues to evolve, my guess is that Manulife could rise to become one of the most efficient operators out there. Add AI personalization and other automation opportunities into the equation, and it’s clear that Manulife might be a name that’s deserving of a significant multiple re-rating.
Sure, semiconductors have been the hottest way to play this AI boom. But, in my humble opinion, investors looking for AI ROIs to trickle down ought to look at the financial sector. Whether it’s banking or insurance, it feels like the financial scene stands to benefit greatly from an AI boom, as it stands on the shoulders of CapEx-intensive firms that have already done much of the heavy lifting.
Like it or not, Manulife is an AI winner now, and as it aims to produce more than $1 billion in enterprise value by year’s end (it’s already on track), I wouldn’t bet against the name.
