Friday, June 25, 2010

Sun Life Financial Inc 2

I have this stock (TSX-SLF) in two different accounts. For one account, I bought shares in 2001 and then again, in 2006 and in this account I have lost some 3% per year. The yield I am making on my investment is just 3.4% and this is below the current yield of 4.8%. In the other account, I bought in 2000, 2001 and again in 2003. For this account, I have made a total return of 7.6% per year. Also, in this account, my current yield is 6.5%, and this is better than the current yield.

When I look at the Insider Trading report, I find that there has been Insider Selling to the tune of $4.7M. There has been a minimal of insider buying. Most of the selling would appear to be stock options and insiders seem to have more stock options than stock. This may look like a lot of selling, but since this company is worth some $16.9Billion, it is only some .03% of the company’s value. When I look at this stock last year, there was not much happening in this area. I guess the real negative is the lack of dividend increases, which show lack of the company’s confidence in the near term.

When I look at the P/E ratios, I get 5 year average low of 13.4 and a 5 year average high P/E Ratio of 24.7. Using the current earnings estimates, I get a current P/E of 10.8. Turning to the Graham Price, I get a current Graham Price $43.51 and this is some 32% above the current stock price $29.80. During most years, the Graham Price has at sometime been below the stock price and I have an average of the low stock price being some 22% below the Graham Price. So, by both these measures, the current stock is good on a relative basis. It is also good on an absolute basis, because a price at or lower than the Graham Price is good and a P/E at or below 10 is good (and the stock P/E is not much above 10.)

Turning to the Price/Book Value Ratio, I get a current one of 0.97 and a 10 year average of 1.57. The current P/B ratio is only some 62% of the 10 year average and anything below 80% of the 10 year average is good. The last thing to look at is dividend yield. The current yield is 4.8% with a 5 year average of 3.3% and a 10 year average of 2.5%. So, all these factors show a very good current price.

When a stock price looks very good on a lot of levels, you have to question the viability of the company. Some times stock prices are low because people are worried about the company’s future. This is not the case with this company. Yes, it has had a recent rough time, but it is a solid company. No analyst seems worried about its long term viability. The worst analysts’ comments on this company are that they prefer Manulife or Power Financial to this company.

When I look at the analysts recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy. There are as many Hold recommendations as Buy recommendations on this stock and there is slight less Strong Buy recommendations. (See my site for information on analyst ratings.) These recommendations fit into what I said in the last paragraph. There are no Underperform or Sell recommendations, as all the analysts seem to feel this company has no long term problems. The worse is that they feel other companies will do better in the shorter term than this company will.

As I said yesterday, I will continue to hold on to the shares I have and I, of course, will continue follow this stock.

Sun Life Financial is an insurance company. It provides a diverse range of protection and wealth management products and services to individuals and corporate customers. It operates internationally. Its web site is here Sun Life. See my spreadsheet at slf.htm

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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