Manulife Financial Corp. 2

I own this stock of Manulife Financial Corp. (TSX-MFC, NYSE-MFC). In May 2005, I was look for good companies to buy at a reasonable price. This stock met my criteria. I bought some more stock in October 2005, in April 2009 and in April 2013.

When I look at insider trading, I find $6.1M of insider selling and $6.0M of net insider selling. So there is a bit of insider buying. Insiders not only have stock options, but other stock options type vehicles called Rights Performance Share Units, Rights Restricted Share Units, Deferred Share Units, and Rights Deferred Share Units.

There is little insider ownership, but the CEO does have shares worth around $2.6M. Outstanding shares were increased by 1M shares in 2013 with a book value of $17M and this number of share being worth around $21M at the end of 2013. This increase in shares is 0.05% of the outstanding shares.

The 5 year low, median and high median Price/Earnings Ratios are 11.22, 13.74 and 15.86. These are slightly lower than the 10 year low, median and high median P/E Ratios. The current P/E Ratio is 12.45 based on a stock price of $20.66 and 2014 EPS estimate $1.66. This stock test suggests that the stock price is reasonable.

I get a Graham Price of $22.85. The 10 year low, median and high median Price/Graham Price Ratios are 0.95, 1.12 and 1.32. The current P/GP Ratio is 0.92. This stock price test suggests that the stock price is cheap.

The 10 year Price/Book Value per Share Ratio is 1.51 and the current P/B Ratio is 1.48 a value some 2% lower. This P/B Ratio is based on a stock price of $20.66 and a BVPS of $13.98. This stock price tests suggests that the stock price is reasonable.

The 5 year median dividend yield is 3.54% and the current dividend yield at 2.52% is some 29% lower. This stock price test suggests that the stock price is expensive. On a historical basis the average dividend yield is 3.25% and the median dividend yield is 2.14%.

The problem with dividend yield testing on the stock price is that when this stock got into trouble in 2008, the dividend yield got quite high. This is why the 5 year median dividend yield is at 3.54% and the average is 3.25, but there is a historical median dividend yield at a lower 2.14%. Using the historical median dividend yield, the stock price is low, almost cheap.

The analysts' recommendations are all Buy recommendations. The 12 month stock price consensus is $23.70. This implies a total return of $17.23% with 2.52% from dividend and 14.71% from capital gains. Most analysts see this stock as one that is recovering. This stock hit a high of $44.19 in 2007 and it is only around half this amount still.

Lorne Steinberg, President & Portfolio Manager, Lorne Steinberg Wealth Management talks on BBN on his stock picks and one is Manulife. He also thinks dividends are posed to increase. David Pett of the Financial Post says that MFC should lead the red hot rise in Canadian life insurance stocks.

I still believe in this stock and I do expect it to recover. I still think that it will be a long haul as we still do not know when interest rates will get to a more normal level. See my spreadsheet at mfc.htm.

This is the second of two parts. The first part was posted on Monday, April 28, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

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. Its web site is here Manulife.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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