When the smoke cleared toward the closing bell Friday I had to add to my position to lower my cost base. This was just too tempting to pass up:
- As far as I can see, 3.7% is the highest this stock has ever yielded in its history
- Earnings were up 6% in their Canadian operations within a tough market
- The stock traded at these levels in late 2004 when the trailing 12-month earnings per share (EPS) was $2.88; trailing EPS is now $3.83
- My valuation models using discounted cash flow (using an EPS growth rate of 9% and a P/E of 11x) show that the stock should be bought under a share price of about $45.00 (I bought today at about $38.60/share)
- Price/Earnings ratio is right around 10x trailing earnings which has to be considered good value for a company with very low debt, a juicy yield, and a solid earnings and dividend growth history.
This purchase lowered my adjusted cost base (ACB) by about $3/share. Sun Life Financial (SLF) now makes up about 9% of my non-registered portfolio.