Thursday, April 29, 2010

Manulife Financial Corp

Today, I would like to talk about Manulife Financial Corp (TSX-MFC, NYSE-MFC). I bought this stock in 2005 and 2006, with a bit more purchased in 2009. I have made a negative return, including dividends of -6.8%. According to my spreadsheet, people who have held this stock for 10 years have made money. However, that is only because the price increased rapidly during the first year of demutualization. (The same thing happened to Sun Life Financial.)

When looking at my spreadsheet, it is obvious that this company has not done well over the past two years. The Return on Equity was 1.8% and 4.9% for 2008 and 2009 respectively. When you look at earnings growth over the last 5 and 10 years, there isn’t any. The 5 and 10 year earnings growth is -15.5% and
-1.2%. The good thing about earnings is that they are up 144% from 2008. The other thing to note about earnings is that when earnings came in at $.73 and were below estimates (I had $1.01) estimates for 2010 were reduced. I, however, must point out, that this is a common occurrence. Future estimates are often raised or lower because estimates for the current year are missed or exceeded.

From my point of view of a shareholder, the decrease in dividends is a negative. However, decreases in dividends are sometimes necessary for future growth. I know there have been arguments about whether or not this decrease in dividends was necessary or not. The other negative is the increase in the number of shares, especially when it comes with a decrease in Book Value.

However, there are some very positive notes for 2009. The two most important things are the growth in Revenue between 2008 and 2009 of 21.5% and the growth in Cash Flow between 2008 and 2009 of 39%. Both revenues growth and cash flow growth are very important for future growth in the value of this stock. The last thing to point out is that the Accrual Ratio is negative. The Ratio is low at only -.39%, but it is good that it is negative and that the Operational Cash Flow is higher than Net Income.

I will continue to hold on to the share I have. Tomorrow I will talk about what the analysts are saying about this stock. When I look over analysts’ reports, it would seem that whatever people think of its short term prospects, most feel it has good long term prospects.

This is a life insurance company in the financial services business. It offers financial protection products (e.g. Life Insurance) and wealth management services (i.e. segregated funds, mutual funds and pension products). They sell products to individuals and business. They are an international company, selling in Canada, US and Asia. This company is listed on Canadian, US, Hong Kong and Philippines Stock Exchanges. Its web site is See my spreadsheet at

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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