The TSX’s Largest IPO in 2021 Could Be the #1 Insurance Stock This Year

TSX’s largest IPO last year and one of the 10 largest IPOs in Canada’s history could be the number one pick of growth investors in 2022.

| More on:

Royal Bank of Canada Capital Markets, through Nitin Babbar, global co-head of equity capital markets, said the markets were perfectly placed for IPOs in 2021. Canada’s largest bank was the top Canadian IPO manager last year with 17 issues. However, BMO Capital Markets won the mandate for Definity Financial (TSX:DFY).

The IPO of the $3.42 billion property and casualty insurer was the largest in 2021. Also, it was the third-largest Canadian IPO in the past five years and one of the 10 largest in Canada’s history.

Some market analysts recall the paths of Manulife Financial (TSX:MFC)(NYSE:MFC) and Sun Life Financial (TSX:SLF)(NYSE:SLF) before. However, with its successful IPO, Definity could be the top insurance stock in 2022.

Dividend bonanza

Two of the largest life insurance companies in Canada rewarded investors with dividend hikes in November 2021. Manulife increased its quarterly dividend by 12%, while Sun Life boosted its payouts by 20%.

Manulife boasts a strong track record of delivering progressive dividend increases. Besides the principal operation in Canada, the $49.57 billion company is present in Asia and Europe. In the U.S., the brand is John Hancock.

In the nine months ended September 30, 2021, management reported 22.73% and 19.45% growth in net income and core earnings, respectively, versus the same period in 2020. Manulife president and CEO Roy Gori credited the diversity and resiliency of the franchise for the impressive results.

Sun Life delivered strong financial results too in the first three quarters of 2021. Its net income rose 72.05% to $2.85 billion compared to the same period in 2020. Despite the pandemic’s impact on several of its markets, Sun Life president and CEO Kevin Strain said the company continues to see positive momentum.

The $41.56 billion company is the leader in insurance and asset management. According to management, Sun Life is the first Canadian organization to introduce digital tools across all wealth and insurance service platforms. Like Manulife, Sun Life is present in the U.S. and Asia (Philippines and Singapore).

Manulife (+12.49%) and Sun Life (+28.59%) were winning investments in 2021, although the latter was the better performer. Price-wise, Manulife ($25.52) is cheaper than Sun Life ($70.92). Dividend-wise, Manulife is more generous at 5.17% versus 3.72%.

Future insurance giant

Definity could morph or transition to an insurance and financial services provider like Manulife and Sun Life someday. On November 18, 2021, IPO day, the company raised around $1.4 billion. As of January 7, 2021, the share price is $29.58 — 8.87% higher than on the first trading day. However, market analysts see a return potential between 8.65% and 21.7% in 12 months.   

The seventh-largest provider of property and casualty insurance in Canada has a market share of 4.6%. Economical Insurance, Sonnet Insurance, Family Insurance, and Petline Insurance are the brand names under Definity’s umbrella. Because of significant investments to reshape the business, management says it can build premier market capabilities to become a digital leader in a large and growing marketplace.

Income and growth investors

Manulife and Sun Life are well-loved dividend stocks by income investors. While Definity pays zero dividends, the TSX’s largest IPO in 2021 could be one of the top growth stocks this year.

Just Released! 5 Stocks Under $50 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $50 a share.

Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.

Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How I’d Invest $7,000 in My TFSA for $660 in Tax-Free Annual Income

Canadians looking for ways to make the most of the new TFSA contribution room should consider investing in these two…

Read more »

Doctor talking to a patient in the corridor of a hospital.
Dividend Stocks

This Dividend King Paying 7.5% in Monthly Income Is a Must-Have

This high-yield TSX stock might not be a textbook Dividend King, but its reliable monthly payouts and improving financials make…

Read more »

path road success business
Dividend Stocks

How to Invest $50,000 of Tax-Free Cash as Canada-US Trade Uncertainty Escalates

Few Canadian stocks are as easy a choice as this one, making it perfect during volatile periods.

Read more »

monthly desk calendar
Dividend Stocks

How I’d Generate $200 in Monthly Income With a $7,000 Investment

Want to establish $200 in monthly income (or even more?) Here's an easy way to start today that will provide…

Read more »

Printing canadian dollar bills on a print machine
Dividend Stocks

Got $25,000? Turn it Into $250,000 in a TFSA as the Canadian Dollar Rises

Investing doesn't have to be risky or difficult, especially with this top stock.

Read more »

A woman shops in a grocery store while pushing a stroller with a child
Dividend Stocks

Where Will Loblaw Be in 3 Years?

Loblaw (TSX:L) stock could be a stellar performer as tariffs and headwinds move in on Canada's economy.

Read more »

customer uses bank ATM
Dividend Stocks

Where Will National Bank Be in 5 Years?

National Bank of Canada (TSX:NA) stock still looks like a great deal at these levels.

Read more »

A worker overlooks an oil refinery plant.
Dividend Stocks

The Smartest Industrial Stock to Buy With $3,000 Right Now

Aecon is a value stock that's benefiting from strong infrastructure spending today and in the years to come.

Read more »