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Why Should You Hold Manulife (MFC) Stock in Your Portfolio?

Manulife Financial Corp. MFC is poised to grow on a strong Asia business, expanding wealth and asset management business and solid capital position. The stock carries an impressive VGM Score of B. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.

Return on equity of 11.4% in the trailing twelve months was better than the industry average of 10.8%, reflecting the company’s efficiency in utilizing shareholders’ fund. Manulife aims more than 13% ROE in the medium term.

Manulife delivered earnings beat in two of the last four quarters, with the average being 6.87%. The Zacks Consensus Estimate has moved up 0.9% for 2020 and 3.1% for 2021 over the past seven days, reflecting analysts’ optimism.

Is the Hold Strategy Apt for the Stock?   

The expected long-term earnings growth rate is pegged at 10%, better than the industry average of 9.5%. It aims core EPS growth between 10% and 12% over the medium term.

Manulife is continually expanding business in Asia, the major contributor to the company’s earnings. In-force business growth in Asia and favorable product mix should continue to drive its earnings.

Manulife’s Wealth and Asset Management (WAM) business continued to witness core earnings growth. While it already has compelling presence in North America and Asia, Manulife Asset Management has identified Europe (and the wider EMEA market) as a significant growth area.  The company thus has been make long-term investments in this region.

Manulife expects to lower costs, targeting an expense efficiency ratio of less than 50% or $1 billion in cost savings and avoidance by 2022.  The company targets $1 billion expenses savings by 2020.

This Zacks Rank #3 life insurer boasts a strong capital position. While the company had $32 billion of capital above the supervisory target with $53 billion in total available capital, LICAT ratio improved 900 bps. In the first nine months of 2020, the company released $770 million in capital through portfolio optimization and targets to free up $5 billion in capital by 2022. Also, it targets leverage ratio of 25 over the medium term.   

Moreover, the company has increased its dividend at a six-year (2014-2020) CAGR of 8.2%. Its current dividend yield of 5% is higher than the industry average of 3.3%, which makes the stock an attractive pick for yield-seeking investors. The company targets 30-40% dividend payout over the medium term.

Shares of the company have lost 17.8% year to date compared with the industry’s decline of 14.9%.

 

Stocks to Consider

Some better-ranked companies from the same space include Sun Life Financial SLF, Brighthouse Financial BHF and Primerica PRI.
    
Sun Life delivered an earnings surprise of 20.00% in the last-reported quarter. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank.

Brighthouse Financial delivered earnings surprise of 26.59% in the last-reported quarter. It carries a Zacks Rank #2 (Buy).

Primerica delivered earnings surprise of 16.81% in the last-reported quarter. It carries a Zacks Rank #2.

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Manulife Financial Corp (MFC): Free Stock Analysis Report
 
Sun Life Financial Inc. (SLF): Free Stock Analysis Report
 
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