Is it a good company at a reasonable price? The stock price seems currently reasonable. It is a good company and the increasing interest rate will benefit it. As with other insurance companies, it found it difficult with the very low interest rates we have been having.
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 I have done ok with this stock. I have had it for 22 years and bought it a number of times since then. My total return of 7.97%, with 4.60% from capital gains and 3.37% from dividends. I generally like my stocks to have a total return of 8.00% per year.
If you had invested in this company in December 2011, $1,000.08 you would have bought 54 shares at $18.52 per share. In December 2021, after 10 years you would have received $955.53 in dividends. The stock would be worth $3,802.14. Your total return would have been $4,757.67.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $18.52 | $1,000.08 | 54 | 10 | $955.53 | $3,802.14 | $4,757.67 |
The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% range) at 3.82%. The 5, 10 and historical dividend yields are also moderate at 3.86%, 3.76% and 3.63%. The dividend current is currently low (below 8% per year) with the increase per year over the past 5 years at 7.55%. The last dividend increase was in 2021 and it was for 20%, but this was after no increase in 2020.
The Dividend Payout Ratios (DPR) are fine, but DPR for CFPS could be better. The DPR for EPS for 2021 is 35% with 5 year coverage at 45%. The DPR for Adjusted EPS for 2021 is 38% with 5 year coverage at 40%. The DPR for Cash Flow per Share for 2021 is 20% with 5 year coverage at 49%. I like both these DPRs for CFPS to be at 40% or less. The DPR for Free Cash Flow for 2021 cannot be calculated because of a negative FCF in 2021. The 5 year coverage at 49%.
Debt Ratios are fine. Because this is a financial, we need to look at Long Term Debt/Covering Assets Ratio and that is fine at 0.82. The Liquidity Ratio is not important for financials, but I calculate one anyway and for 2021 it is 1.79. The Debt Ratio for 2021 is 1.09 and this is fine for a financial.
The Total Return per year is shown below for years of 5 to 22 to the end of 2021. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | 7.55% | 9.21% | 6.43% | 2.78% |
| 2011 | 10 | 4.84% | 19.72% | 14.29% | 5.43% |
| 2006 | 15 | 4.79% | 5.19% | 2.40% | 2.78% |
| 2001 | 20 | 8.17% | 6.56% | 3.71% | 2.85% |
| 1999 | 22 | 7.40% | 12.57% | 8.10% | 4.48% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 10.12, 12.04 and 13.96. The corresponding 10 year ratios are 10.30, 11.98 and 13.67. The corresponding historical ratios are 11.75, 13.28 and 14.67. The current P/E Ratio is 11.55 based on a stock price of $69.17 and EPS estimate for 2022 of $5.99. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
This company also provides and Adjusted EPS. The 5 year low, median, and high median Price/Adjusted Earnings per Share Ratios are 8.92, 10.27 and 11.91. The corresponding 10 year ratios are 9.57, 11.07 and 12.41. The current P/AEPS Ratio is 10.64 based on a stock price of $69.17 and AEPS estimate for 2022 of $6.50. The current ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $74.07. The 10 year low, median, and high median Price/Graham Price Ratios are 0.76, 0.87 and 1.03. The current P/GP Ratio is 0.93 based on a stock price of $69.17. The current ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $77.16 based on AEPS. The 10 year low, median, and high median Price/Graham Price Ratios are 0.72, 0.84 and 0.92. The current P/GP Ratio is 0.90 based on a stock price of $69.17. The current ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share Ratio of 1.44. The current P/B Ratio is 1.70 based on a Book Value of $23,857M, Book Value per Share of $40.71 and a stock price of $69.17. The current P/B Ratio is 18% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I also find a Book Value per Share estimate for 2022. This estimate gives a P/B Ratio for 2022 of 1.56 based on a Book Value per Share estimate for 2022 of $44.40, Book Value of $26,018M and a stock price of $69.17. This current ratio is 8% above the 10 year median ratio of 1.44. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 9.97. The current P/CF Ratio is 8.36 based on Cash Flow per Share estimate of $8.27 for 2022 (an old estimate from 2021), Cash Flow of $4,846M, and a stock price of $69.17. The current ratio is 16% below the 10 year median 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 yield is 3.82% based on dividends of $2.64 and a stock price of $69.17. The current ratio is 5.14% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median dividend yield of 3.76%. The current dividend yield is 3.82% based on dividends of $2.64 and a stock price of $69.17. The current ratio is 1.4% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 0.99. The current P/S Ratio is 1.05 based on Revenue estimate for 222 of $37,747M, Revenue per Share of $66.12 and a stock price of $69.17. The current ratio is 5.8% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is probably reasonable. The dividend yield tests say the stock price is below the median and the P/S Ratio test says it is above the median. The rest of the testing shows the stock as reasonable and above or below the median.
Last year I said that the results of stock price testing were that the stock price was probably reasonable. Most of the testing is pointing to a reasonable price of above or below the median. The dividend yield tests and the P/S Ratio test is pointing to a reasonable price, but above the median. So, some caution is advised.
When I look at analysts’ recommendations, I find Strong Buy (5), Buy (3) and Hold (6). The consensus is a Buy. The 12 month stock price consensus is $76.96. This implies a total return of 15.08% with 11.26% from capital gains and 3.82% from dividends based on a current stock price of $69.17.
When I looked at analysts’ recommendations last year, I found Strong Buy (4), Buy (6), Hold (4), and Underperform (1). The consensus was a Buy. The 12 month stock price consensus was $68.57. This implies a total return of $10.51% with 7.07% from capital gains and 3.44% from dividends based on a stock price of $64.04. What happened was a price move to $69.17 and a total return of 11.45% with 8.01% from capital gains and 3.44% from dividends. So, analysts last year were pretty accurate.
Analysts on Stock Chase like this stock and mention that rising rates are good for it. Stock Chase gives this stock 5 stars out of 5. Kay Ng of Motley Fool thinks this is a reasonably price and should be able to increase its dividend by 5-7% per year. Adam Othman on Motley Fool thinks that this company’s stability is reason enough to consider Sun Life as a great beginner stock from a capital preservation perspective. Chris MacDonald on Motley Fool talks about why investors in Sun Life stock may want to sit pretty with this investment right now. The company on Newswire talks about their fourth quarter results. Simply Wall Street on Yahoo Finance has a report on this stock. They also give a warning of dividends not well covered by earnings, but this is not true, the dividends are well covered by earnings but not cash flow.
Sun Life Financial 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 Equity Partners Income Trust (TSX-AD, OTC-ALARF) ... learn more on Monday, April 11, 2022 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.
See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
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