Wednesday, April 9, 2014

Sun Life Financial Inc. 2

On my other blog I am today writing about March 2014 Dividends continue...

I own this stock of Sun Life Financial Inc. (TSX-SLF, NYSE-SLF). I own this stock of Sun Life Financial Inc. (TSX-SLF, NYSE-SLF). After I sold my CIBC bond I had money to buy some stocks so I made a hit list and looked for ones on this list selling at a reasonable price. This stock was selling at a reasonable price.

When I look at insider trading, I find insider selling of $40.5M and net insider selling at $40.2M. This is a lot. Insiders not only have stock options, but also have other option like vehicles called Deferred Share Units, Units Performance Share Units, Units Restricted Share Units, Units Sun Shares, Units Stock Fund Units and Units Incentive Share Units. So there are lots of ways that insiders are rewarded.

In 2013, outstanding shares were increase by 3M shares for stock options with a book value of $120M and this amount of shares were worth $112M at the end of 2013. This is reason enough to vote negative on questions of say on pay on the proxy. This is the highest increase in outstanding shares in the last few years as other years recently outstanding shares were increased by 1M to 2M shares.

The 5 year low, median and high median Price/Earnings per Share Ratios were 8.75, 10.40 and 11.90. This are a fair bit lower than the 10 year low, median and high median P/E Ratios which were 11.90, 13.28 and 14.57. The current P/E Ratio is 13.26 based on a stock price of $36.59 and 2014 EPS estimates of $2.76. This stock price test says that the stock price is high.

I get a Graham Price of $37.82. The 10 year low, median and high median Price/Graham Price Ratios are 0.76, 0.99 and 1.10. The current P/GP Ratio is 0.97 based on a stock price of $36.59. This stock price test says that the stock price is reasonable and below a median price.

I get a 10 year Price/Book Value per Share Ratio of 1.35. The current P/B Ratio is 1.59 based on a share price of $36.59 and a BVPS of $23.03. The current P/B Ratio is 18% higher than the 10 year P/B Ratio and this stock price test suggests that the stock price is reasonable, but towards to high end of the reasonable range.

The 5 year median dividend yield is 5.44% and the current dividend yield is 3.94% a value almost 28% lower. This stock price test suggests that the stock price is high. The historical average dividend yield is 4.49% a value some 12% higher than the current dividend yield. The historical median dividend yield is 2.5% a value some 57.4% lower than the current dividend yield. Here again there is mixed signals on reasonableness of the stock price. On an historical basis, the stock price would at least appear to be reasonable.

When I look at the analysts' recommendations, I find Buy and Hold recommendations. The most recommendations are in the Hold category and the consensus recommendation would be a Hold. The 12 month stock price consensus is $40.30. This implies a total return of 14.07% with 3.95% from dividends and 10.14% from capital gains.

You have to wonder about a Hold consensus and a total return expected of 14%. Rather a high expected return for a Hold recommendation. The problem is that there is a huge range of for the 12 month stock price consensus from $37.00 to $43.00, which comes to a 5% to a 22% total return.

A recent article in Forbes talks about this stock hitting oversold territory. By the way, this is a bullish sign. The blogger Dividend Growth Investing and Retirement explains why he has recently sold his shares in this company. He is right, of course, that this company is no longer a dividend growth company. However, I feel that it will be one again, I just do not know when. The blogger Passive Income Earner has a slightly different take on this stock.

The stock price is probably still at a reasonable level. This is certainly the case on a long term basis. However, this company has yet to really recover from 2008. The thing is we are in a time with extremely low historical interest rates. This is one big problem for insurance companies. I think that you got to consider insurance companies to be of high risk than they normally are considered to be. At this point, I will not be adding stock to any insurance company I currently hold, although on the other hand, I am not selling my shares either. See my spreadsheet at slf.htm.

This is the second of two parts. The first part was posted on Tuesday, April 8, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

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.

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.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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