2-for1 Sale
The S&P/TSX Composite Index climbed 146 points to close out the previous week on Friday, May 26. Some of the best-performing sectors included base metals, battery metals, information technology, and financials.
Today, I want to look at two top stocks in the financial space: EQB (TSX:EQB) and Manulife Financial (TSX:MFC). Which is the better buy as we look ahead to the summer season? Both stocks are facing unique challenges in the months and years ahead. Meanwhile, both offer a unique set of incentives for prospective buyers. Let’s jump in.
Should you bail on EQB, as Canada housing faces big challenges?
EQB is a Toronto-based company that provides personal and commercial banking services to retail and commercial customers in Canada. Its shares have jumped 7.3% month over month as of close on May 26. EQB stock has now climbed 15% so far in 2023.
This company unveiled its first-quarter (Q1) fiscal 2023 earnings on May 2. EQB delivered adjusted net income of $101 million — up 10% in the year-over-year period. Meanwhile, adjusted diluted earnings per share (EPS) jumped 7% compared to the final quarter of fiscal 2022 to $2.62. Total assets under management (AUM) and assets under administration (AUA) jumped 2% quarter over quarter to $104 billion. Half of EQB’s loans under management are insured.
EQB has a solid balance sheet, but it is not in league with the elite financial institutions like the Big Six Canadian banks. Of course, that does not mean investors should turn their back on this profit machine. In Q1 2023, the company delivered adjusted revenue growth of 40% to $264 million while net interest income surged 45% to $236 million. The bank’s customer base increased by 26% year on year to 336,457, and deposits jumped 12% to $8.1 billion.
Shares of EQB currently possess a favourable price-to-earnings (P/E) ratio of 8.6. Meanwhile, the stock offers a quarterly dividend of $0.37 per share. That represents a 2.2% yield.
Why you should have faith in Manulife for the long term
Manulife Financial is another Toronto-based company that provides financial products and services to a customer base in Asia, Canada, the United States, and around the world. The company has made a concerted drive to capitalize on the growth of Asia’s middle class in recent decades. That has yielded mostly positive results in the near term. Meanwhile, shares of Manulife have increased 4.8% so far in 2023.
In Q1 of fiscal 2023, the company delivered core earnings growth in constant currency of 6% to $1.5 billion. Meanwhile, core earnings per share climbed 11% year over year to $0.79. Manulife has experienced success with the launch of its ManulifeMOVE platform in Asia, driving incremental sales growth. Moreover, over 50% of the company’s in-force eligible customers have migrated to the platform. Of that total, 38% have made an insurance purchase.
This TSX stock also has an attractive P/E ratio of 8.8. Manulife offers a quarterly dividend of $0.365 per share, which represents a very strong 5.7% yield.
Verdict
EQB has delivered superior results in the near term, but it could experience headwinds due to the evolving situation in Canadian real estate. Meanwhile, I’m still very bullish on Manulife’s long-term prospects in Asia. Both stocks offer nice value right now, but Manulife offers the much chunkier dividend. I’m sticking with the old guard in Manulife, as we move into June.
