Spring Sale
Manulife Financial (TSX:MFC)(NYSE:MFC) is the biggest insurer in Canada, with nearly a third of us being considered a customer of the financial behemoth in one way or another. Despite that market appeal, many investors have steered clear of Manulife in recent months, particularly as the Muddy Waters Research short-selling events.
Interestingly enough, while Manulife’s stock is finally seeing impressive gains of 21% year to date, the stock remains flat over the course of the past two-year period, reflecting under 4% growth in that time. What that means for investors is that Manulife, despite the impressive gains in 2019, is still an incredible investment option for value-seeking investors, and there are several reasons for investors to consider it.
Manulife continues to see strong growth
With the Canadian market remaining saturated, Manulife has turned in recent years to expand further into Asia, where a wealth explosion is creating a new class of consumers with the demand and ability to purchase the financial products that Manulife offers.
To adequately penetrate those Asian markets, Manulife set up a series of agreements with financial companies across nearly every market in Asia, becoming the preferred and, in some cases, exclusive provider of financial products.
To say that the effort has been successful would be an understatement. In the most recent update, the region saw a 19% increase in new business to US$1.1 billion for the full fiscal year. Overall, the company earned $4.8 billion in fiscal 2018, reflecting a $2.7 billion increase over the prior fiscal year.
Manulife is a Dividend Aristocrat
Manulife’s quarterly dividend continues to be one of the most attractive points of consideration among investors. The current quarterly distribution amounts to a respectable, if not attractive 4.30% yield, which works out to an annualized $1.00 to shareholders. Adding to that appeal is the attractive rate at which that distribution has grown, doubling over the course of the past five years while maintaining annual or better hikes over that same period.
If that weren’t reason enough to see Manulife as an attractive income producer, as a bonus, investors should note that Manulife’s payout ratio is set to come in at a very sustainable level nearly 35%, leaving ample room for further growth and investment.
Manulife is introducing technology at a phenomenal pace
Manulife CEO Roy Gori famously stated some time back that it was time to bring the life insurance industry out of the “dark ages.” In the time since making that announcement, Manulife has embarked on a number of projects to better integrate technology throughout the process, tasked with both improving efficiency and making the process simpler as well as cutting costs for the company.
Over the past fiscal year, Manulife has made several advancements that accomplished that and more. Manulife was the first insurer to use artificial intelligence for underwriting, which had a million transactions last year. The new digital solutions come with a cost measured in jobs, which the company previously noted would be approximately 700 jobs or 2% of Manulife’s workforce.
The technology advancements, staffing reductions, and overall efficiency improvements are part of a multi-year plan by the company to reduce costs.
In short, Manulife represents an intriguing long-term investment option that has both income and growth prospects for investors that is still trading at attractive levels. At time of writing, Manulife trades at just over $23 with a P/E of 10.10.
