Manulife Financial Stock – Back From the Dead in 2024
Manulife Financial, or MFC on the TSX, is a major player in the Canadian insurance sector. The company has seen long periods of growth and stagnation, but recent performance has been strong.
The insurance industry as a whole has been doing well lately, and Manulife is no exception. The company’s success in Asia and its expanding Wealth and Asset Management business have been key drivers of growth.
But with the stock price climbing, many investors are wondering if Manulife is still a good buy. Is there room for further growth? Is the stock overvalued? And what about the dividend – can investors count on continued growth?
Lets dig into Manulife and see if there’s value left or if the stock is fully priced.
Key takeaways
- Manulife’s stock is trading near its 52-week high due to strong performance in Asia and wealth management
- The company’s dividend has shown steady growth, reflecting its improved financial position
- Current valuation and market conditions suggest careful consideration before investing in Manulife stock
- Three stocks I like better than Manulife right now
What is causing life insurers to do so well?
Life insurers are experiencing a period of strong performance for several reasons. One major driver is rising interest rates, which are boosting insurers’ bond portfolios and underwriting margins. This allows companies to earn higher returns on their investments.
Demographic shifts are also playing a crucial role. Aging populations in North America and Asia are increasing demand for life insurance and retirement products. As people get older, they tend to become more risk-averse and seek financial protection. For this reason, the company is seeing large growth in AUM.
The rebound in financial markets has been another boon for insurers. Improved stock market performance has increased the value of their investment portfolios, contributing to stronger balance sheets.
Regulatory changes have provided a more favourable environment for insurers in some regions. This has allowed companies to operate more efficiently and potentially offer more competitive products.
For global insurers like Manulife, expansion into fast-growing Asian markets has been a key growth driver. The rising middle class in countries like China and India represents a massive opportunity for life insurance products.
It’s worth noting that despite these positive trends, many Canadians still lack adequate coverage. About 44% of Canadians don’t have life insurance at all.
So, there could still be room for growth in the domestic market.
Is Manulife still a good price after its large run up?
I believe Manulife Financial remains attractively priced despite its recent share price gains. The stock’s current price-to-earnings ratio of 17.33 is higher than some of its competitors, but it’s also posted some of the best results.
Manulife’s price-to-book ratio of 1.69 also looks reasonable. This metric has climbed from lows around 1.13 earlier in 2023 but remains below historical averages.
The company’s strong fundamentals support its valuation:
- 12.8% year-over-year quarterly revenue growth
- 10.41% return on equity
- Healthy dividend yield of 3.93% to go along with strong payout ratios.
I’m particularly impressed by Manulife’s global performance and expansion. The company is growing faster than expected in international markets, which should drive future earnings growth.
If the company can deliver on its global expansion plans, I believe the company has room to climb further.
How is the dividend looking? Will it continue to grow?
The company recently raised its dividend by 9.6% to $0.40 per share. Despite this boost, payout ratios are healthy enough to support double digit dividend growth for the foreseeable future. The current dividend yield sits at a healthy 3.98%.
With operating cash flow of $23.52 billion, Manulife has ample resources to fund dividend payments and other capital endeavours. The company’s solid earnings outlook, coupled with its prudent financial management, bodes well for future dividend growth.
While some competitors may offer higher yields, I think Manulife strikes a good balance between current income and potential for future growth.
Would I buy the company today?
The company’s current P/E ratio of 17.6 suggests it may be expensive compared to its peers in the insurance sector.
However, The company’s expansion in Asia could be a growth driver, barring any political issues. We can always shield ourselves from potential problems by being well diversified.
To have the prospect of this growth coupled with a nice dividend is ideal. If the company can maintain that balance in the coming years and decades it will be rewarding for investors.
Although rates are coming down, they’re still relatively high, which should be a tailwind for Manulife. Higher rates typically boost insurance companies’ investment income. Manulife’s asset management business is another potential source of growth.
Manulife has high institutional ownership. This suggests institutional confidence in the company’s long-term growth, which is always a nice thing to have.
The company is probably a solid holding right now. We will have to keep an eye on how the company executes its expansion in Asia and be aware of economic and political issues within those markets.