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. I had some more money to spend and wanted to buy stock of dividend paying company I owned, for which I did not own too much. In April 2009, I was looking for something else to buy and Manulife was at a good price. In April 2013, I need to buy higher dividend stocks for my RRIF account. There was some money after RRSP sells, so I bought more MFC.
When I was updating my spreadsheet, I noticed that I invested in the company initially at the wrong time. I bought this stock almost 15 years ago. I also made other purchases in 2006, 2009, 2010, 2013 and 2016. I have made a total return of 2.76% per yar with 0.18% from capital gains and 2.58% from dividends. Looking at total returns from 15 years ago on the stock, it is the lowest at the 15 year period. With a total return of 2.30% with 2.63% from dividends and a capital loss of 0.33%.
The dividend yield is moderate (2% to 4% range). The current dividend yield is 4.29% with 5, 10 and historical dividend yields at 3.81%, 3.51% and 3.00%. Dividend growth has not been consistent and the dividends were cut in 2009 by 50%. They were then flat for a number of years and dividend increases began again in 2014. Dividend growth has been in the moderate range (8% to 14% ranges) since 2014. See chart below.
The Dividend Payout Ratios are good. The DPR for EPS in 2019 is 36% with 5 year coverage at 49%. The DPR for CFPS is 9% for 2019 with 5 year coverage at 10%. The DPR for Free Cash Flow for 2019 is 7% with 5 year coverage at 9%. The Dividend Coverage Ratio for 2019 is 14.69 with 5 year coverage at 10.63. I noticed that that the sites I looked at agreed on what the FCF was.
Debt Ratios are fine. This is a financial, so I look at long term debt and covering assets. The Debt/Covering Assets is 0.99. I calculate a Liquidity Ratio, which is 1.32 for 2019, but this is not an important one for Insurance companies. The Debt Ratio is 1.07 and is normal for financials. The Leverage and Debt/Equity Ratios are 16.15 and 16.15 respectively. These are a little high for an insurance company.
The Total Return per year is shown below for years of 5 to 20 to the end of 2019. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | 11.90% | 6.97% | 3.51% | 3.46% |
| 2009 | 10 | 2.52% | 6.12% | 3.15% | 2.97% |
| 2004 | 15 | 5.16% | 2.30% | -0.33% | 2.63% |
| 1999 | 20 | 8.38% | 9.34% | 5.39% | 3.96% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 9.82, 13.78 and 17.74. The corresponding 10 year ratios are 10.32, 13.78 and 11.32. The corresponding historical ratios are 11.22, 13.94 and 16.27. The current p/E ratio is 8.34 based on a stock price of $26.11 and 2020 EPS estimate of $3.13. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $40.47. The 10 year low, median, and high median Price/Graham Price Ratios are 0.68, 0.80 and 0.97. The current P/GP Ratio is 0.65 based on a stock price of $26.11. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 1.13. The current P/B Ratio is 1.12 based on a stock price of 26.11, Book Value of $45.316M, and Book Value per Share of $23.25. The current ratio is 0.90% below the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable and at the median.
I get an historical median dividend yield of 3.00%. The current dividend yield is 4.29% based on dividends of $1.12 and a stock price of $26.11. The current dividend yield is 43% above the historical median one. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 3.51%. The current dividend yield is 4.29% based on dividends of $1.12 and a stock price of $26.11. The current dividend yield is 22% above the 10 year median one. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 0.76. The current P/S Ratio is 0.96 based on 2020 Revenue estimate of $53,240M, Revenue per Share of $27.32 and a stock price of $26.11. The current ratio is 25% above the 10 year ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is reasonable to expensive. You cannot ignore the P/S Ratio and a ratio of 0.96 is on the high side for life insurance companies. The P/B ratio is pointing to a price right at the median and this is an important ratio. However, there is nothing wrong with the other tests. For the dividend yield testing, the Payout Ratio are in a good place and the P/E Ratios are normal. So, we got rather missed results.
Is it a good company at a reasonable price? The price maybe reasonable. I still am holding on to my shares because I still expect to make good money from this stock in the end. All life insurance companies have had problems in our current low interest rate environment. Since this company has lots of business in Asia, I expect that it will be affect by the current coronavirus. So, the recovery of stock may be delayed.
When I look at analysts’ recommendations, I find Strong Buy (5), Buy (9) and Hold (5). The consensus would be a Buy. The 12 month stock price is $30.50. This implies a total return 21.10% with 16.81% from capital gains and 4.29% from dividends.
See what analysts are saying on Stock Chase . There are mixed reviews, but some say buy at around $26.00. Joey Frenette on Motley Fool thinks it will get much cheaper because of its Asian business and the coronavirus. A writer on Simply Wall Street thinks the P/E Ratio is low because investors do not believe the strong growth in earnings will continue. A writer on Simply Wall Street thinks the company is undervalued. From Bloomberg News on Leader Post talks about Asia weighing on future outlook.
Manulife provides life insurance and wealth management products and services to individuals and group customers in Canada, the United States, and Asia. Its web site is here Manulife Financial Corp.
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