Is it a good company at a reasonable price? I still think that I will do well with this stock over the long term. The stock price is certainly reasonable. There is a sell recommendation on Stock Chase and Brian Madden says that the company cannot break through $30 and that is a problem. He says to buy at the bottom of it range and sell at the time. He thinks what is holding them back is liabilities in the US. Other analysts on Stock Chase think better of this stock.
I own this stock of Manulife Financial Corp (TSX-MFC, NYSE-MFC). This company was demutualized in 1999 and it turned into a dividend growth stock. I bought this company for the first time in 2005. Analysts liked it and it was a dividend growth stock.
When I was updating my spreadsheet, I noticed that I have not made much on this stock today. I have had it for almost 18 years and my total return is 3.18% per year with 0.28% from capital gains and 2.90% from dividends. I still think this stock is worthwhile holding. I know when interest rates hit an historical low that Life Insurance companies were in difficulties. I hope for a better future now that interest rates are rising. Dividends have covered 47% of purchase price. On my earliest purchase in 2005, I am making 5.1% on the purchase price.
The Total Revenue for this company fell some 72% because of Realized and unrealized gains (losses) on assets supporting insurance and investment contract liabilities and on the macro hedge program. Net Premium Income fell only 3%.
The dividend yields are good with dividend growth moderate. The current dividend yield is good (5% to 6% ranges) at 5.45%. The 5, 10 and historical median dividend yields are moderate (2% to 4% ranges) at 4.63%, 3.90% and 3.15%. The dividends are increasing at a moderate rate (8% to 14% ranges) at 10% per year over the past 5 years. The last dividend increase was for 10.6% and it was in 2023.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2022 is 35.9% with 5 year coverage at 36.2%. The DPR for 2022 for Adjusted Earnings per Share (AEPS) is 42.6% with 5 year coverage at 37%. The DPR for 2022 for Cash Flow per Share (CFPS) is 11.6% with 5 year coverage at 10.3%. The DPR for 2022 for Free Cash Flow (FCF) is 7.9% with 5 year coverage at 7.3%.
Debt Ratios are fine, but it does have a lot of debt. Because it is a financial, I am looking at Long Term Debt/Covering Assets Ratio and this is 1.07, which is too high. The company has a lot of debt. I get a Liquidity Ratio of 1.16, but this is not important. The Debt Ratio is 1.07 and this is fine for a Life Insurance Company
The Total Return per year is shown below for years of 5 to 23 to the end of 2022. 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. |
|---|---|---|---|---|---|
| 2017 | 5 | 9.99% | 2.69% | -1.63% | 4.33% |
| 2012 | 10 | 9.76% | 10.78% | 5.98% | 4.80% |
| 2007 | 15 | 2.74% | -0.84% | -3.40% | 2.56% |
| 2002 | 20 | 7.34% | 5.41% | 1.76% | 3.64% |
| 1999 | 23 | 8.55% | 8.68% | 4.27% | 4.41% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 6.53, 7.14 and 9.46. The corresponding 10 year ratios are 8.19, 10.26 and 12.21. The corresponding historical ratios are 10.82, 13.76 and 15.86. The current P/E Ratio is 8.12 based on a stock price of $26.78 and EPS estimate for 2023 of $3.30. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 6.75, 7.78 and 9.00. The corresponding 10 year ratios are 7.09, 9.13 and 10.55. The current P/AEPS Ratio is 8.16 based on a stock price of $26.78 and AEPS estimate for 2023 of $3.28. 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.
I get a Graham Price of $44.30. The 10-year low, median, and high median Price/Graham Price Ratios are 0.56, 0.73 and 0.85. The current ratio is 0.55 based on a stock price of $26.78. This ratio is below the low ratio of the 10 year median ratios. 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 1.04. The current P/B Ratio is 1.01 based on a stock price of $26.87, Book Value of $49,288M and Book Value per Share of $26.43. The current ratio is 2% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have an estimate of $25.40 for the Book Value per Share for 2023. This ratio implies a P/B Ratio of 1.05 and Book Value of $47,371M with a stock price of $26.78. This ratio is 2% above the 10 year median ratio. 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 2.47. The current P/CF Ratio is 6.36 based on stock price of$26.78, Cash Flow per Share (CFPS) estimate for 2023 of $4.21 and Cash Flow of $7,852M. The current ratio is 158% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. However, the CFPS of $4.21 makes no sense to me. The running 5 year average is $10.41 and CFPS for last two years was 11.92 and 9.51.
I get an historical median dividend yield of 3.15%. The current dividend yield is 5.45% based on dividends of $1.46 and a stock price of $26.78. The current yield is 73% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 3.90%. The current dividend yield is 5.45% based on dividends of $1.46 and a stock price of $26.78. The current yield is 40% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 0.80. The current P/S Ratio is 0.89 based on Revenue estimate for 2023 of $56,067, Revenue per Share of $30.06 and a stock price $26.78. The current ratio is 12% 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. It may also be cheap. The dividend yield tests are saying the stock price is cheap, but this is not confirmed by the P/S Ratio test which says the stock price is reasonable, but above the median. Other good tests say the stock price is either cheap for reasonable and below the median.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (3), Hold (9) Underperform (1) and Sell (1). The consensus would be a Hold, but the recommendations are all over the place. The 12 month stock price consensus is $28.72. This implies a total return of 12.70% with 7.24% from capital gains and 5.45% from dividends based on a current price of $26.78.
Analysts on Stock Chase like this stock. Stock Chase gives this stock 5 stars out of 5. Money Sense ranges this stock 11 out of 100 dividend stocks. Ambrose O'Callaghan on Motley Fool thinks this stock is cheap and buyable. Adam Othman on Motley Fool says this is a stable stock to use to build wealth. The company has a press release on Newswire about this 2022 results.
A Simply Wall Street report on Yahoo Finance talks about analysts upgrading their revenue and earnings estimates. Simply Wall Street gives this stock 4 stars out of 5 and list one warning of earnings are forecast to decline by an average of 3.5% per year for the next 3 years.
Manulife provides life insurance, annuities, and asset management products to individuals and group customers in Canada, the United States, and Asia. The U.S. business contributes about 30% of earnings. The Asia segment provides products in over 11 countries and contributes around 30% of earnings. The Canadian business segment contributes approximately 20% of earnings. Its web site is here Manulife Financial Corp.
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When do you consider selling? This stock did return well below 8% after holding for 18 years.
ReplyDeleteWhen interest rates fell to 0%, I know that insurance companies would have a hard time. So, I did not sell my insurance companies. However, I also did not expect that interest rates would stay so low for so long. I did not expect them to go into negative territory. This has never happened in history.
ReplyDeleteI now expect Manulife and other insurance companies to do better.
Do not forget that this company has been doing a lot better lately with 5 and 10 year total return over 9%, but the 15 year return is low at 2.7%.
ReplyDelete