I own this stock of Sun Life Financial Inc (TSX-SLF, NYSE-SLF). I first bought this stock in 2000 when it was first demutualized. It was very cheap. I bought more in 2001, 2003 and 2006. This stock was on Mike Higgs' Canadian Dividend Growth stock list and on the other dividend lists that I followed.
When I was updating my spreadsheet, I noticed the TSX Composite Index is down 21% and this stock is down 22.6% since the end of 2019. There has been buying over the past year. The Net Insider Buy is at 0.12%. This is high as you would expect it to be closer to 0.01%. There has been some buying after the drop at below $42.00.
This stock hit a high in 2007 of $55.71 that was only surpassed in 2019 with a high of $61.43 in November. This is the reason for the low 15 year total return of $5.67. The current price is lower now with this bear market. Insurance companies have had a hard time with extremely low interest rates. See chart below.
The dividend yields are moderate with dividend growth that is low. The dividend yields have mostly been moderate (2% to 4% ranges). The exception was when this stock was first issued yields were low (below 2%) and when interest rates tanked, they were very high. The yield hit 9.50% in 2009. The current dividend yield is good (5% and 6% ranges) at 5.05%, with 5, 10 and historical rates are moderate at 3.64%, 3.91% and 3.63%. The dividend growth is low (under 8% per year) with the latest 5 year growth at 7.8% per year. See chart below.
The Dividend Payout Ratios are fine, but the CF ones are a bit high. The DPR for 2019 for EPS is 48%, with 5 year coverage at 45%. The DPR for CFPS for 2019 is 49% with 5 year coverage at 33%. The DPR for Free Cash Flow for 2019 is 54% with 5 year coverage at 36%. Dividend Coverage Ratio for FCF is 1.85 with 5 year ratio at 2.79.
Debt Ratios are fine. Since this a financial, you need to look at the Long Term Debt /Asset Coverage Ratio. This ratio for 2019 is 0.81. This is good coverage. The Liquidity Ratio is not important but I calculated it anyway and for 2019 at 2.19. The Debt Ratio for 2019 is 1.09 and this is fine for a financial. The Leverage and Debt/Equity Ratios for 2019 are 12.13 and 11.13 and are normal for a financial.
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 | 7.84% | 10.01% | 7.15% | 2.86% |
| 2009 | 10 | 3.85% | 10.89% | 6.95% | 3.94% |
| 2004 | 15 | 6.13% | 5.67% | 2.62% | 3.05% |
| 1999 | 20 | 7.66% | 12.56% | 8.00% | 4.56% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 10.47, 13.38 and 10.47. The corresponding 10 year ratios are 10.30, 11.81 and 13.32. The corresponding historical ratios are 11.88, 13.50 and 14.88. The current P/E Ratio is 8.80 based on a stock price of $43.54 and dividends of $2.20. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $62.61. The 10 year low, median, and high median Price/Graham Price Ratios are 0.76, 0.86 and 0.99. The current P/GP Ratio is 0.70 based on a stock price of $43.54. 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 $1.41. The current P/B Ratio is 1.24 based on a Book Value of $20,687M, Book Value per Share of $35.19 and a stock price of $43.54. The current P/B Ratio is 12% below the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 3.63%. The current dividend is 5.05% based on dividends of $2.20 and a stock price of $43.54. The current dividend is 39% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 3.91%. The current dividend is 5.05% based on dividends of $2.20 and a stock price of $43.54. The current dividend is 29% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 0.95. The current P/S Ratio is 0.74 based on a stock price of $43.54, Revenue estimate for 2020 of $34,482M and Revenue per Share of $58.66. The current P/S Ratio is 22% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably relatively cheap. Except for the P/B Ratio test, all the tests are showing the stock price as relatively cheap. The dividend yield test shows that the stock is relatively cheap and this is confirmed by the P/S Ratio. I see no problem with any of the tests.
Is it a good company at a reasonable price? I like insurance companies for long term investments. I have invested in insurance companies, with this stock plus Power Financial and Manulife. Both Sun Life and Power Financial have done much better for me than Manulife. I will continue to hold this company as I believe it is a good dividend stock to hold. The price is certainly reasonable and probably cheap.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (4), Hold (10), Underperform (1) and Sell (1). The consensus would be a Hold. The 12 month stock price is $60.56. This implies a total return of 44.14% with 39.09% from capital gains and 5.05% from dividends. A consensus of Hold does not really go with such a return expected within a year. The recommendations are all over the place.
See what analysts are saying on Stock Chase . Mixed views are insurance companies, but this one is liked better than Manulife. Karen Thomas on Motley Fool says it will have Covid virus headwinds in slower sales and higher claims. A writer on Simply Wall Street says that this company is growing its dividend but also is reinvesting more than half its income and this is pretty attractive combination. A writer on Simply Wall Street says that although there is a wide variance in estimates, there are no major changes in these estimates after the 4th quarter. Rita Trichur and Christine Dobby on the Globe and Mail says that banks and insurers are seeking count approval to hold online annual meetings amid coronavirus outbreak. Might this be the future?
Sun Life Financial Inc is one of Canada's Big Three life insurance companies along with Great-West Lifeco and Manulife. Sun Life provides insurance, retirement, and wealth-management services to individual and corporate customers in Canada, the United States, and Asia. Its web site is here Sun Life Financial Inc.
The last stock I wrote about was about was Goodfellow Inc (TSX-GDL, OTC-GFELF) ... learn more. The next stock I will write about will be Alaris Royalty Corp (TSX-AD, OTC-ALARF) ... learn more on Friday, April 3, 2020 around 5 pm. Tomorrow on my other blog I will write about Power Financial Corp.... learn more on Thursday, April 02, 2020 around 5 pm.
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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