Is it a good company at a reasonable price? This is a life insurance stock. I consider it a long term hold. I have not done that well on this stock, but I have no intentions of selling it. Many analysts think it will do better in the future. The stock price seems reasonable at this time based on the 10 year dividend yield test.
I own this stock of Manulife Financial Corp (TSX-MFC, NYSE-MFC). This has not been a great investment as I have had it for almost 19 years and I have made a total return of 3.87% per year with 1.01% from capital gains and 2.86% from dividends. Basically, I bought some of this stock in 2016 at prices higher than the current price. Generally, buying a stock over time rather than a single purchase works out best, but not in this case at present.
This company has not always done well for long term investors. See the chart on Total Return below. What you like to see that Total Return is at least 8% for all long term periods. Although, I knew that the very low interest rates we had for many years would be detrimental to life insurance companies. Bye the way, I have no intentions of selling my shares in this company.
When I was updating my spreadsheet, I noticed that this life insurance company also made big changes because of new versions of IFRS. I do not update my spreadsheets because a previous was restated, unless there was an accounting error. This is because I cannot change all the previous years. Fortunately, I did find some continuity. It will be interesting to see how all these new changes work out in future years.
If you had invested in this company in December 2013, for $1,004.64 you would have bought 48 shares at $20.93 per share. In December 2023, after 10 years you would have received $469.92 in dividends. The stock would be worth $1,405.44. Your total return would have been $1,875.36. This would be a total return of 7.27% per year with 3.41% from capital gain and 3.86% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $20.93 | $1,004.64 | 48 | 10 | $469.92 | $1,405.44 | $1,875.36 |
The current dividend yield is moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 4.45%. The 5 year median dividend yield is good (5% to 6% ranges) at 5.37%. The 10 and historical median dividend yields are also moderate at 4.17% and 3.20%. The dividend increases are moderate (8% to 14% ranges) at 9.9% per year over the past 5 years.
I see no problems with The Dividend Payout Ratios (DPR). The DPR for 2023 for Earnings per Share (EPS) is fine at 56% with 5 year coverage good at 39%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is good at 12% with 5 year coverage at 39%. The DPR for 2023 for Cash Flow per Share (CFPS) is fine at 13% with 5 year coverage at 11%. The DPR for 2023 for Free Cash Flow (FCF) is good at 7% with 5 year coverage at 7%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 55.94% | 39.09% |
| AEPS | 11.85% | 39.01% |
| CFPS | 12.91% | 11.32% |
| FCF | 6.99% | 6.89% |
Debt Ratios are fine. The Long Term Debt/Covering Assets Ratio for 2023 is fine at 0.97 and currently at 0.97. The Liquidity Ratio for 2023 is a bit low at 1.12 and 1.12 currently, but unimportant for financials. If you added in Cash Flow after dividends, the ratios are good at 1.98 and currently at 1.40. The Debt Ratio for 2023 is fine at 1.06 as this is a financial.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R A | 0.97 | 0.97 |
| Lg Term R | 7.64 | 6.82 |
| Intang/GW | 0.19 | 0.17 |
| Liquidity | 1.12 | 1.12 |
| Liq. + CF | 1.98 | 1.40 |
| Debt Ratio | 1.06 | 1.06 |
The Total Return per year is shown below for years of 5 to 24 to the end of 2023. 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. |
|---|---|---|---|---|---|
| 2018 | 5 | 9.92% | 13.88% | 8.61% | 5.26% |
| 2013 | 10 | 10.88% | 7.27% | 3.41% | 3.86% |
| 2008 | 15 | 2.56% | 5.58% | 2.31% | 3.27% |
| 2003 | 20 | 6.62% | 4.88% | 1.69% | 3.19% |
| 1999 | 24 | 8.64% | 9.11% | 4.93% | 4.18% |
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 8.53, 9.99 and 11.45. The corresponding historical ratios are 10.82, 13.74 and 15.72. The current P/E Ratio is 9.31 based on a stock price of $32.81 and EPS estimate for 2024 of $3.53. 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 6.86, 7.71 and 8.88. The corresponding 10 year ratios are 6.96, 8.14 and 10.01. The current P/AEPS Ratio is 8.87 based on a stock price of $32.81 and AEPS estimate for 2024 of $3.70. 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 $43.13. The 10-year low, median, and high median Price/Graham Price Ratios are 0.52, 0.63 and 0.73. The current P/GP Ratio is 0.70 based on a stock price of $32.81. 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 10-year median Price/Book Value per Share Ratio of 1.04. The current P/B Ratio is 1.47 based on Book Value of $40,349M, Book Value per Share of $22.34 and a stock price of $32.81. The current P/B Ratio is 42% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I also have a Book Value per Share estimate for 2024 of $24.80. This implies a ratio of 1.32 with a stock price of $32.81 and Book Value of $43,886M. This ratio 28% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Cash Flow per Share Ratio of 2.35. The current P/CF Ratio is 7.12 based on Cash Flow per Share estimate for 2024 of $4.61, Cash Flow of $8,326M and a stock price of $32.81. the current ratio is 203% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. However, the Cash Flow per Share estimate seems out of line with the past history for CVPS, I would think that this test is suspect.
I get an historical median dividend yield of 3.20%. The current dividend yield is $4.88% based on Dividends of $1.60 and a stock price of $32.81. The current dividend yield is 52% 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 4.17%. The current dividend yield is $4.88% based on Dividends of $1.60 and a stock price of $32.81. The current dividend yield is 17% above the historical 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 0.80. The current P/S Ratio is 1.39 based on Revenue of $42,480M, Revenue per Share of $23.52 and a stock price of $32.81. The current ratio is 75% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. However, the Revenue figures have been very volatile lately. I do wonder how good this test is.
Results of stock price testing is that the stock price is probably reasonable. I am going with the 10 year dividend yield test. I note that there is no problem with the DPRs. The P/E Ratio, P/AEPS Ratio and P/GP Ratio tests are good and the stock price is shown as reasonable. The P/B Ratio tests are good and they say the stock price is expensive. I do not think that the P/S Ratio or P/CF tests are good.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (8), Hold (4) and Underperform (1). The consensus recommendation is a Buy. The 12 month stock price consensus is $34.05 with a high of $40.00 and low of $26.20. The consensus stock price of $34.05 implies a total return of 8.66% with 3.78% from capital gain and 4.88% from dividends.
Analyst on Stock Chase have mixed views of this company. Stock Chase gives this stock 5 stars out of 5. It is on my dividend lists. Kay Ng on Motley Fool thinks this stock was too depressed for too long. It had good earnings, price popped and it has a good dividend. Amy Legate-Wolfe on Motley Fool thinks this stock is a long term buy as it finds more opportunities in Asia. The company put out a press release via Newswire about their 2023 results.
Simply Wall Street via Yahoo Finance talks about this company’s dividends. Simply Wall Street gives this stock 4 stars out of 5. It lists no warning messages.
Manulife Financial provides life insurance, annuities, and asset management products to individuals and group customers in Canada, the United States, and Asia. The U.S. business, which primarily operates under the John Hancock brand, contributes about 30% of earnings. The Asia segment contributes around 30% of earnings. The Canadian business segment contributes approximately 20% of earnings. Its web site is here Manulife Financial Corp.
The last stock I wrote about was about was Intact Financial Corp (TSX-IFC, OTC-IFCZF) ... learn more. The next stock I will write about will be Nuvei Corp (TSX- NVEI, OTC- NVEI) ... learn more on Monday, February 26, 2023 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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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