Thursday, May 3, 2007

Sun Life Financial purchase

I have taken an opening position in Sun Life Financial (SLF) today. Usually the way I get into a stock is to take a half position when I see good value, and then either finish my position lower, thus lowering my ACB, or else holding off until a later date if the stock moves higher.

Briefly - what I like about Sun Life:

  • Exposed to two great industries to be in, if your goal is making money, insurance and wealth management (they have a stake in CI mutual funds among other names in Canada and the U.S.)
  • Exposed internationally, including Asia
  • Very good demographic play
  • Earnings growth has been impressive and consistent (boring is good!)
  • Debt to equity of 0.32 and a dividend payout ratio of 31%
  • Dividend yield of 2.5%, and they have been raising dividends twice per year at a rate of over 13% per annum
  • Once again boring is good!

Risks

  • Last quarter experienced negative earnings growth in their U.S. insurance business
  • Looking to sell off their MFS mutual fund unit in the U.S., without much success, they may end up not getting enough money for it, however they held their ground so far
  • Their growth in their domestic businesses may be slowing.
  • ROE needs improvement to increase multiple and trade with MFC and GWO

The Current Value?

  • They reported earnings that were impressive, in my opinion, at 14% growth, and were hammered down ~5% by investors
  • I have SLF as a 'buy' assuming a 9% eps growth rate, which is conservative
  • PEG ratio is 1.06
  • P/E is 13.6, for projected growth of 11% per annum

SLF now becomes a 6% weight of my portfolio.

Telus, which I recently added to is now a 12% weight

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On another note their competitor and a stock that I also own, Manulife Financial increased their dividend today from $0.80 to $0.88 cents per share (an increase of 10%) - a slightly smaller raise than in the recent past, but they are raising twice per year lately.

4 comments:

FinancialJungle.com said...

Good call. Thanks for the reminder. Have to take a closer look. I've been holding SLF for almost a year now, and this might be a good time to add more.

moneygardener (AKA investor99) said...

Like I said, I will be adding more if it keeps dropping.

Below $50 would be nice.

Sam said...
This comment has been removed by the author.
Sam said...

Thought you might be interested in this video of Telus CEO, Darren Entwistle, sent to me by a friend. He talks about their stock price vs. other telecom companies.

http://www.youtube.com/watch?v=PCgyMZ-Nn5c