In this piece, we’ll check in on a top-tier, but still highly underrated insurance play that might make sense to stash away for the dividend growth as well as relative stability when the market waters get really nasty. With the Nasdaq 100 imploding more than 6% while the S&P 500 collapsed over 4% in a single trading session, just two days after the U.S. midterm elections, it certainly feels like the AI trade is crashing viciously.
Of course, some may argue that it’s too soon in the game to call it a crash, but with the Nasdaq 100 in a full-blown correction and a bear market not all too far off, investors might wish to reconsider some of the less-tech-exposed names that were wrongfully dragged lower on a day that may have seen indiscriminate selling and more than a fair share of margin calls from those retail investors who thought it’d be a good idea to lever up.
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Sun Life Financial
Either way, shares of Sun Life Financial (TSX: SLF) stood out as one of the hard-hit names that’s an absolute steal after Thursday’s turbulent trade session. Despite not being remotely close to the AI or semiconductor theme, the shares imploded, tanking just over 10% in a single day in what was a vicious move that only got worse as the day progressed. Indeed, all it took was a day, and shares of SLF are now in a correction.
The big question moving forward is whether the $57 billion financial can bounce back, even as the market continues to be dragged lower by the weight of the unravelling AI and semi trade. Of course, it was also a terrible day for the broader TSX Index, which was off just north of 2% on the day.
With some pretty underwhelming third-quarter results released on what was an absolutely brutal bloodbath of a day on Wall and Bay Street, perhaps investors look at the name as more of an opportunity, especially now that the yield is around 3.3%.
For $100 a month in dividends, you’d need $1,200 per year. And based on Sun Life’s yield, you’d need to invest just shy of $37,000 in the name. After a brutal plunge, I’d certainly not put down a full position all in one go, though. Instead, dollar-cost averaging (DCA) could be the way to tame volatility.
Life isn’t all too bright for Sun Life after a brutal market-wide decline
In my humble opinion, the third-quarter results themselves weren’t as bad as the post-earnings reaction would suggest. It was an abysmal day for the financial sector in particular, as the big banks led the way lower in the Canadian market. In my view, the poorly received, but still quite decent quarter just acted as salt in the wounds. As interest rates look to rise while restructuring costs make a bit of an impact, perhaps there’s reason for investors to show a bit of pause and take a bit of profit off the table.
After all, the name was up nearly 33% year to date, at least before Thursday’s bloodbath. The shares were overheated and quite expensive. After a 10% drop, the shares still look mildly frothy (maybe fairly priced) at 17.4 times trailing price-to-earnings (P/E) despite new macro concerns that investors might have.
While I wouldn’t back up the truck, I would consider nibbling on the way down, especially if the broad market sell-off intensifies. At the end of the day, Sun Life stands out as an indirect AI winner (via significant cost savings and operating efficiencies). With a strong dividend growth track record, I’d not sleep on the name.
