Wednesday, March 28, 2012

Sun Life Financial Inc 2

I own this stock (TSX-SLF, NYSE-SLF). I first bought this stock in 2000 and some more in 2001, 2003 and 2006. I have made a 1% per year return on this stock. The only reason I have a positive return is because of dividends. I calculate that I have made a return of 4.76% per year in dividends.

When I look at the insider trading report I find very minimal insider buying over the past year and no insider selling. Insiders not only have options they have Units Performance Share Units, Units Restricted Share Units, Units Sun Shares and Deferred Share Units. Everyone, including directors have lots more options than shares (or common stock).

There are some 386 institutions that hold 55% of the shares of this company. Over the last 3 months they have bought and sold these shares and they have very, very marginally reduced their shares outstanding.

I get 5 year median high and low Price/Earnings ratios of 12.40 and 14.47. (10 year median high and low P/E ratios are very close the 5 year ones.) The current P/E ratio of 9.4 therefore shows a very low current stock price.

I get a Graham price of $36.00 and the current stock price of $24.01 is some 33.3% lower. The low and median difference between the Graham Price and the stock price is the stock price being 24.2% lower and 3.9% lower than the Graham Price. By this measure the current stock price is low.

I get a 10 year median Price/Book Value Ratio of 1.25 and a current P/B Ratio of 1.07. The current one is some 85% of the 10 year median and therefore shows the current stock price to be a reasonable one.

The 5 year median dividend yield is 5.02%, which is some 20% lower than the current dividend yield of 6%. This test shows a very low stock price. This is especially so since there have been no dividend increases for a while.

When I look at analysts’ recommendations, they are all over the place with Strong Buy, Buy, Hold, Underperform and Sell recommendations. However, the most recommendations are in the Hold place and the consensus recommendation would be a Hold. Some Hold recommendations come with a 12 months share price at or below the current one. One Buy recommendation gave a 12 months stock price of $27.

No one talks about a dividend increase, at least before 2015. Everyone feels that there are still tough times ahead for Life Insurance companies, especially over the next two years. Some expect improvements as the economy improves and when interest rates are better. One remarks on the fact that the P/B Ratio is close to 1.00. (That is the book value and stock price is almost the same.)
There is an article about Sun Life posting fourth-quarter loss of $525-million at the G&M. The Passive Income Earner talks about Canadian Insurance Companies in December 2011.

I still think that this company will recover and I am holding on to my shares. I realize that it might take them awhile. I expect that recovery is still a couple of years away. To me, I will get a decent return on my money in dividends while I wait for this recovery. I have too much in this company to consider buying any more shares. The purchase of shares in this company would be risky. Any purchase must be considered to be a long term purchase.

Sun Life Financial is a leading international financial services organization providing a diverse range of protection and wealth accumulation products and services to individuals and corporate customers. Chartered in 1865, Sun Life Financial and its partners today have operations in key markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. 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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