Is it a good company at a reasonable price? I believe that insurance companies will now do better with higher interest rates. I own this stock and I intent to hold on to it. It is on all the dividend lists I follow and I think with good reason. If you like this company and want to have it, now is a good time to buy. The stock price seems to be reasonable and below the median.
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 my return on this stock is also low at 7.81% per year with 4.33% from capital gains and 3.48% from dividends. It is an insurance company and I knew when I held on to it that very low or 0% interest rates would be bad for insurance companies. However, you never think that unusual periods would last so long. Very low to 0% interest rates lasted a lot longer than I thought possible. However, I got paid in dividends to wait it out.
In the financial statements, they totally revamped how to present revenue. I tried to follow the same stream used in 2022. Even the analysts do not show revenue for 2023, only 2022 and then for 2024. I will wait and see why analysts come up with for the new way to determine and Revenue and then see what I can do with my spreadsheet. The Revenue on the income statement was not the only problem. Other figures from other statements did not match up with last year’s report. The problem is that under IFRS, rules keep changing.
If you had invested in this company in December 2013, for $1,013.04 you would have bought 27 shares at $37.52 per share. In December 2023, after 10 years you would have received $555.53 in dividends. The stock would be worth $1,855.44. Your total return would have been $2,410.97. This would be a total return of 10.28% per year with 6.34% from capital gain and 4.04% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $37.52 | $1,013.04 | 27 | 10 | $555.53 | $1,855.44 | $2,410.97 |
The current dividend yield is moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 4.31%. The 5, 10 and historical dividend yields are also moderate at 4.31%, 376% and 3.75%. The dividend growth is moderate (8% to 14% per year ranges) at 9.5% per year over the past 5 years. The last dividend increase was for 2023 and it was for 4%. This was the second dividend increase in 2023. Dividends between 2022 and 2023 increase at 8.7%.
The Dividend Payout Ratios (DPR) are good. The DPR for 2023 for Earnings per Share (EPS) is fine at 57% with 5 year coverage at 48%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is good at 47% with 5 year coverage at 42%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 31% with 5 year coverage at 42%. The DPR for 2023 for Free Cash Flow 1 (FCF) is good at 31% with 5 year coverage at 43%. The DPR for 2023 for Free Cash Flow 2 (FCF) is good at 16% with 5 year coverage at 17%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 57.03% | 48.21% |
| AEPS | 47.17% | 42.05% |
| CFPS | 31.25% | 42.56% |
| FCF 1 | 30.72% | 42.56% |
| FCF 2 | 16.40% | 16.53% |
Debt Ratios are good. The Long Term Debt/Covering Assets Ratio for 2023 is good at 0.85. The Long Term Debt/Market Cap Ratio for 2023 is fine but high at 3.71 and currently at 3.52. The Liquidity Ratio for 2023 is good at 1.81. The Debt Ratio for 2023 is fine for a financial at 1.08.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R+A | 0.85 | 0.85 |
| Lg Term R | 3.71 | 3.52 |
| Intang/GW | 0.35 | 0.33 |
| Liquidity | 1.81 | 1.81 |
| Liq. + CF | 2.20 | 2.13 |
| Debt Ratio | 1.08 | 1.08 |
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 | 9.51% | 12.27% | 8.70% | 3.57% |
| 2013 | 10 | 7.62% | 10.28% | 6.24% | 4.04% |
| 2008 | 15 | 5.01% | 10.28% | 6.06% | 4.22% |
| 2003 | 20 | 7.70% | 7.28% | 3.85% | 3.44% |
| 1999 | 24 | 7.93% | 12.06% | 7.29% | 4.77% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 10.12, 12.26 and 13.96. The corresponding 10 year ratios are 10.41, 12.15 and 13.69. The corresponding historical ratios are 11.51, 13.08 and 14.33. These are fairly consistent and that is good for testing. The current ratio is 11.16 based on a stock price of $72.44 and EPS estimate for 2024 of $6.49. 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/Adjusted Earnings per Share Ratios are 8.63, 10.27 and 11.84. The corresponding 10 year ratios are 10.41, 12.15 and 13.69. The current P/AEPS Ratio is 10.65 based on a stock price of $72.44 and AEPS estimate for 2024 of $6.80. The current ratio is between the low and median ratio 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 $74.36. The 10-year low, median, and high median Price/Graham Price Ratios are 0.73, 0.84 and 0.96. The current ratio is 0.97 based on a stock price $72.44. The current ratio is above the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive. But it is just inside the expensive area.
I get a 10-year median Price/Book Value per Share Ratio of 1.50. The current P/B Ratio is 2.00 based on a Book Value of $21,125M, Book Value per Share of 36.14 and a stock price of $72.44. The current ratio is 33% 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 $39.70. This analyst calculates the Book Value differently from me and with this calculation, the 10 year median ratio is 1.26. The current ratio is 1.82 based on a Book Value of $23,209M and stock price of $72.44. This ratio is 45% 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 7.65. The current P/CF Ratio is 8.36 based on Cash Flow per Share estimate for 2024 of $8.66, Cash Flow of $5,063M and a stock price of $72.44. The current ratio is 9.4% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 3.65%. The current dividend yield is 4.31% based on a stock price of $72.44 and Dividends of $3.12. The current dividend yield is 18% 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 4.31% based on a stock price of $72.44 and Dividends of $3.12. The current dividend yield is 14% 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 1.03. The current ratio is 0.93 based on Revenue estimate for 2024 of $45,372M, Revenue per Share of $77.61 and a stock price of $72.44. The current ratio is 9% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. I have concerns about this test. I had a hard time calculating the current Revenue because the company is changing their accounting. The estimate is some 47% above the 2023 Revenue, but it is close to that of 2020. The estimate site does not say what the Revenue is for 2023.
Results of stock price testing is that the stock price is probably reasonable. Both the dividend yield tests show the stock price as reasonable. The P/S Ratio test confirms this, but I do wonder how good the P/S Ratio test is. Seven of my tests are showing the stock price as reasonable and two of my tests are showing the stock price as expensive.
When I look at analysts’ recommendations, I find Strong Buy (4), Buy (4), Hold (5) and Underperform (1). This is rather a broad range of recommendations. The consensus is a Buy. The 12 month consensus stock price is $75.46, with a high of $83.00 and low of $66.00. The consensus stock price of $75.46 implies a total return of $8.48% with 4.17% from capital gains and 4.31% from dividends.
There are 5 recommendations on Stock Chase for 2024 and 4 entries are Buy and one is a Hold. Stock Chase gives this stock 5 stars out of 5. It is on the dividend lists that I follow. Kay Ng on Motley Fool thinks this stock is a good long term investment. Nicholas Dobroruka on Motley Fool thinks this is a wise stock to buy to balance out riskier holdings. The company put out a Press Release about their fourth quarter of 2023.
Zacks Equity Research via Yahoo Finance reviews this stock and calls it a value stock. Simply Wall Street via Yahoo Finance reviews this stock. Simply Wall Street gives this stock 3 and one half stars out of 5. Simply Wall Street has no warnings on this stock.
Sun Life provides life insurance, retirement, and asset management products to individuals 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 Wednesday, April 10, 2024 around 5 pm. Tomorrow on my other blog I will write about Digital Serfs .... learn more on Tuesday, April 9, 2024 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.
See my site for an index to these blog entries and for stocks followed. 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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
Also, on my book blog I have put a review of the book Leadership by Henry Kissinger learn more...
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