Thursday, April 16, 2015

Manulife Financial Corp.

Sound bite for Twitter and StockTwits is: Back to dividend growth stock. It looks like this stock is returning to a dividend growth stock. I have not yet made much on this stock, but I expect to see it perform better in the future. See my spreadsheet at mfc.htm.

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.

Manulife was the first insurance company to raise dividends since 2008 and in2014 it raised its dividend by 19.2%. However, this was also the only insurance company to cut dividends since 2008 and it cut its dividend by 50% in 2009. This leaves MFC with dividend decline of 6.1% per year over the past 5 years and a dividend growth of 2% per year over the past 10 years.

The Dividend Payout Ratio was 32% for EPS and 9.6% for CFPS in 2014. The 5 year median values are DPR of 32% for EPS and 9.8% for CFPS. The 5 year median figures of DPR for EPS hide a lot. EPS was low or non-existent between 2008 and 2011 and during this period the EPS could not cover dividends.

The dividend yield on this stock has mostly been moderate. The current dividend yield is 2.79%. The 5 year median dividend yield is higher at 3.54%. The historical average and historical median dividend yields are 3.27% and 2.20% respectively.

I have not done well with this stock to date. My total return is 0.18% per year with a capital loss of 2.29% per year with dividends at 2.47% per year. The total returns are fine for the last 5 years, but has a loss over the past 10 years. The 5 year total return is 8.22% per year with 2.89% per year from dividends and 5.34% per year from capital gain. The 10 year total return is a loss of 1.85% per year with dividends at 2.34% per year and a capital loss of 4.19% per year.

Outstanding shares have grown at 1.2% and 1.4% per year over the past 5 and 10 years. Shares have growth due to Stock Options, DRIP and Share Issues and have decreased due to Buy Backs. Revenue has had moderate growth over the past 5 and 10 years. Earnings have good growth over the past 5 years, especially in the last 2 years and no growth over the past 10 years. Cash flow has had no growth over the past 5 years and moderate growth over the past 10 years.

Revenue is up by 6.3% and 7.2% per year over the past 5 and 10 years. Revenue per Share is up by 5.1% and 5.7% per year over the past 5 and 10 years. Another measure of growth for insurance companies is Assets under Management. Here growth is good for the last 5 years and moderate for the last 10 years, with growth at 9.5% per year over the past 5 years and at 7.1% per year over the past 10 years.

EPS is up by 17.03% per year over the past 5 years mainly due to EPS increases over the past 2 years. EPS is flat over the past 10 years.

Cash Flow is down by 1.4% and up by 6.7% per year over the past 5 and 10 years. The CFPS is down by 2.5% and up by 5.2% per year over the past 5 and 10 years.

The Return on Equity was good until 2008. Since then MFC has only had a ROE of 10% or more once and that was last year. However, the ROE for 2014 is not far off 10% at 9.9%. The ROE on comprehensive income has been better than the ROE on Net Income over the past two years. The 2014 ROE on comprehensive income is 18.3%.

When it comes to debt ratios, the Liquidity Ratio is not of much importance. This is the same with banks. The Debt Ratios on insurance companies tend to be low and this company is no different with the Debt Ratio for 2014 at 1.06. Leverage and Debt/Equity Ratios tend to be high on insurance companies, but this company has some of the highest ratios with the 2014 ratios at 17.04 and 16.04 respectively.

This is the first of two parts. The second part will be posted on Friday, April 17, 2015 and will be 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. 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 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.

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

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