Sun Life Financial is a Canadian financial services company. It trades on Toronto Stock Exchange (TSX) as "SLF". TSX: SLF specializes in life insurance, but it also offers group benefits, wealth solutions, and is a global asset manager.
The Sun Life stock price was CAD64.53 at close on May 12th. This is nearly a 19.42% year-over-year (YOY) increase from 2020, when SLF hit its all-time low of CAD36.44 on March 16th.
SLF has experienced a steady bull run since its COVID-related drop. In fact, the stock is gearing up to overcome its previous all-time high of CAD66.44 in February 2020.
But is SLF a good investment for your portfolio this year? We'll help you figure out the answer to that question with this guide. Keep reading for everything you need to know about Sun Life Financial.
Sun Life Financial has been around since 1865, making it one of the world's longest-standing insurance companies. It's also one of the largest insurance companies in the world.
The company brought in revenues of CAD39.67 billion in 2019. In 2020, the company reported USD1.25 trillion assets under management.
Sun Life has grown steadily over time. And now, analysts project its growth rate will escalate. Earnings have increased 2% every year for the past five years; future earnings should compound to 8.47% per year.
Analysts estimate that SLF is trading below its fair value price by at least 52%. This discrepancy stands to increase even further, too, because of Sun Life's growth opportunities.
Here are the top three opportunities Sun Life can seize for organic growth.
Importantly, Sun Life is a diversified business. 41% of the company's revenues come from its insurance products. The remaining revenue streams come in through its global asset management vertical.
The asset management business itself is also highly diverse. The debt securities business brings in CAD82.3 billion while mortgage and loan products make up a combined CAD50 billion. The remaining portfolio consists of policy loans, cash, investment properties, and equities.
Sun Life reported a new diversification strategy in its most recent investor presentation. The company has plans to further expand its asset management businesses (SLC Management and MFS). This will create even more growth opportunities.
Sun Life is also a global business. Only 20% of revenues come from Canada, with the US (18%) and Asia (16%) markets following close behind. The majority of SLF's business (30%) is done globally through its asset management business.
In its most recent investor presentation, Sun Life reported that its Canadian business is growing. Retail sales were up 18% in 2020. Sun Life's Guaranteed Investment Fund also had record sales of $330 million.
Sun Life offers group benefits to employers in the US. This vertical recently acquired a leading US health care provider, which will expand its market reach. SLF's US benefits group will also see new opportunities from the US's growing life insurance coverage gap.
Asia is the world's biggest and fastest-growing market. Sun Life Financial currently has penetration in China, the Philippines, Indonesia, India, and Hong Kong. It recently entered the Vietnamese and Malaysian markets, too.
Sun Life recently reported 27% more sales of its insurance products in Asia. The company has also increased its sales advisors on the ground in Asia by 9% YOY. It has reported that it plans to become a leader in Asian life insurance.
The company also has a strong balance sheet. It's highly liquid, allowing Sun Life to offset its liabilities. The excess working capital will also support reinvestment into organic growth opportunities.
Sun Life has a total of CAD5 billion in potential capital. It has CAD1.8 billion in cash on hand and CAD3.1 billion in leverage. The company's debt to capital rating is 22.7% or CAD300 million in debt to CAD30 billion in securities.
Sun Life Financial plans to use these funds primarily for organic growth. But the company will also fund new acquisitions, execute share buybacks, and repatriate partnerships to increase revenue potential.
The S&P rated SLF a "very strong" buy in all of the company's operating markets. Moody's also rated SLF "High Quality" while A.M. Best and DBRS rated the share Superior and Excellent, respectively.
All of these ratings imply that Sun Life Financial is prepared to meet its financial obligations to shareholders.
The company pays out common shares of CAD0.55 and a range of preferred shares of approximately CAD0.09 to CAD0.3. The annual dividend yield is 3.6%, which is higher than the stock market industry average of 3.3%.
As we mentioned above, analysts project that SLF is trading at least 50% below its actual value. Zack's Industry Outlook also ranked SLF #1, which means it's in the top 5% of stocks with the highest earning potential.
These are all good signs that the price of SLF will increase.
SLF is a relatively steady investment with a long track record to refer to. Even though it was down due to COVID, SLF's return on equity was 14.2% in 2020. Compare that to the market's average return on equity of 10.8%.
The entire financial industry saw an average share price drop of 15.7% or more. Meanwhile, though SLF's price did decline during COVID, the meagre 0.6% decrease was nothing compared to the industry average.
All in all, these factors make SLF a good buy. And SLF is a good idea if you plan to invest in the stock for your savings accounts. This includes Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs).
Sun Life shares have seen a 12.8% total shareholder return over 5 years, outshining top life insurance companies.
Manulife Financial, the Royal Bank of Canada, and Great-West Lifeco compete with SLF. Still, we think SLF is the better buy of all these stocks. Here's why.
Manulife Financial trades as MFC on the TSX. As of this writing, MFC traded at CAD25.76.
Like SLF, Manulife hit an all-time low of CAD13.62 in March 2020. However, it has yet to fully recover. MFC's previous all-time high is only CAD27.63, but the stock is already experiencing a bearish market as it's dropped in price from March 2021.
Also like SLF, Manulife started in Canada and expanded to the US and Asia. The two companies even have similar revenues and AUMs. MFC brings in CAD39 million per year and manages CAD1.08 trillion worth of assets.
Still, MFC only saw 5.77% earnings in the last quarter. Its Zack's rating is a buy, but it's ranked a #2 stock instead of #1 like SLF.
The Royal Bank of Canada trades as RY on the TSX. On March 13th, 2021, it traded at CAD121.10.
RBC was somewhat shielded from the COVID-related lows. In March 2020, it only declined to CAD75.50, which isn't a far cry from its 2016 dip. RBC has since recovered in bounds, hitting a 20-year high at the beginning of May 2021.
Of course, RBC is Canada's largest bank. It also has operations in multiple international countries. In 2020, RBC had CAD843.6 billion AUM, making it less well-capitalized than SLF.
The RBC share offers a meagre 3.9% earnings, much lower than the 9% average.
Great-West Lifeco trades as GWO on the TSX. In May 2021, GWO's price was around CAD36.33.
This stock hit its lowest price since 2021 in March 2020, bottoming out at CAD22.42. GWO has been slower to rebound than competing stocks. But it's drawing closer to its 2015 high of CAD37.01.
Differing from the other competitors on our list, GWO has expanded into international markets exclusively through its subsidiaries.
GWO has five wholly-owned and independent business entities. Each subsidiary is headquartered in one of the company's five global markets, Canada, the United States, Mexico, Europe, and Asia.
GWO has presented 4.04% 5-year returns to investors. The stock is on the rise, but it's still a giant leap away from SLF's whopping returns.
So, what's the bottom line on the Sun Life stock price? Should you buy, sell, or hold?
The company has a long track record of steady organic growth to show for. It's also well-capitalized, highly diversified, and prepared to expand into new global markets. SLF offers steady, reliably returns ideal for building savings.
Compared to competitors, SLF's returns are higher. And except for RY, the share was much more recession-resistant than competing stocks in the industry.
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