Investing in blue-chip dividend stocks, part of recession-resistant sectors, allows you to create a passive-income stream. As dividends are not guaranteed, it’s crucial to look beyond a company’s forward yield and analyze its fundamentals before making an investment decision.

TSX dividend stocks, such as Sun Life (TSX:SLF) and Manulife (TSX:MFC), are part of the insurance sector, which is fairly recession-resistant. Since March 2000, Sun Life stock has returned more than 1,280% to shareholders after adjusting for dividends. In this period, Manulife stock has returned 770%.

Despite these outsized gains, SLF and MFC offer you a dividend yield of 4.1%. So, let’s see which top TSX stock is a better buy right now.

Which TSX dividend stock should you own right now?

In the fourth quarter (Q4) of 2024, Manulife Financial and Sun Life Financial reported contrasting performances as the two Canadian life insurance giants navigate shifting market dynamics.

Growth trajectories

Manulife posted record underlying earnings of more than $7 billion for the first time, with Asia and Global Wealth & Asset Management now accounting for 70% of core earnings, a 10 percentage point increase from 2023. Its strategic pivot toward higher-growth businesses is paying dividends, with Asia earnings growing 17% year over year.

Sun Life reported more modest growth with full-year underlying net income of $3.9 billion, up 3% from the previous year. While Canada delivered record underlying earnings of $1.5 billion (up 6%), the U.S. business faced headwinds from its stop-loss insurance segment, where higher claim severity impacted quarterly results.

Asset management contrast

In asset management, the two insurers told different stories. Manulife’s Global WAM (wealth and asset management) business generated $13.3 billion in net inflows, while Sun Life’s MFS Investment Management continued to struggle with outflows, including US$20 billion in Q4 alone.

However, Sun Life’s SLC Management achieved a record capital raising of $10 billion in Q4, bringing its full-year total to $24 billion.

Capital deployment

Both insurers demonstrated financial strength with robust capital positions. Manulife’s LICAT (Life Insurance Capital Adequacy Test) ratio stood at 137%, while Sun Life’s was even stronger at 152%.

Manulife announced a 10% dividend increase and a new share-buyback program, which will cover up to 3% of the outstanding shares. It also highlighted $2.8 billion in capital release from strategic reinsurance transactions during 2024.

Sun Life similarly committed to continuing share buybacks under its existing program, with management indicating they expect to be “a strong buyer of our shares.”

Regional performance

Asia remains a key growth engine for the two insurers, with Manulife and Sun Life both reporting 17% year-over-year earnings growth in the region. However, Manulife took no impairment charges, while Sun Life recorded an impairment on bancassurance agreements in Vietnam due to challenging market conditions.

Investment outlook

Manulife appears to have more positive momentum heading into 2025, with its strategic reshaping toward higher-return, lower-risk businesses yielding results. Its core RoE (return on equity) expanded to 16.4%, with a clear path to its +18% target by 2027.

Sun Life maintains a slightly higher underlying return on equity (RoE) at 17.2% but faces more immediate challenges, particularly in its U.S. stop-loss business, where pricing increases of 14% plus an additional 2% are being implemented to address issues with claim severity.

Which TSX stock is a better buy right now?

Manulife currently presents the more compelling investment case. Its successful portfolio transformation, stronger earnings momentum, significant capital generation through strategic transactions, and clear upward trajectory in RoE provide multiple catalysts for share price appreciation.

While Sun Life maintains solid fundamentals with its diversified business model and strong capital position, the challenges in its U.S. stop-loss business and ongoing outflows in the MFS segment create near-term headwinds that may take several quarters to address fully.

The post Better TSX Dividend Stock to Own: Manulife or Sun Life? appeared first on The Motley Fool Canada.

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Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.