Sun Life Financial Inc (SLF.TO)

(Top Pick Jun 5/14, Up 10.22%) He likes the higher dividend yield. Just did their first dividend increase since 2008. Their core life insurance business allows them expansion into other areas of the industry. You want to be in it ahead of the interest rate hike curve.

Statistically this is slightly cheaper and slightly more attractive than Manulife (MFC-T). However, Manulife have been acquiring new businesses. They are going to have a 15 year tie-in to a major financial distributor in Asia. Sun Life has had a few problems, but they are turning that around. The focus for them is the growth of the private wealth business.

The attraction is that there are two real businesses: The money management side and the insurance side. Life insurance companies will be beneficiaries if and when interest rates go up.

Right now there is a real dynamic trade-off between this company and Manulife (MFC-T). He owns both companies. With this one, you have a company with a slightly higher yield. Their last quarter had some disappointing elements because of their US subsidiary. They are well exposed to the US market. Much of their product is much less dependent on interest rates and equity markets. He thinks there is room to own both.

Doesn’t have much in the way of lifecos in his portfolios, which has been good up until now, but life insurance companies have the ability, unlike any other companies, to make money when interest rates go up. This really, really helps them. Part of the reason they have underperformed in the last while is because interest rates have been low, gotten lower, and then got lower than anybody thought possible. The surprise rate cut from the bank of Canada hasn’t helped. Should we see periods of A) higher rates and B) higher stock markets, this company is leveraged to benefit from that. If there is a change in the direction of these 2 things, that is where you want to be.

Stock vs. Stock. MFC-T vs. SLF-T. MFC-T has 10% earnings growth for the next couple of years and SLF-T is a little less than that. Times like this are a buying opportunity.

Manulife (MFC-T) or Sun Life (SLF-T)? Both of these companies pay decent dividends in the 3%-4% range, but the business doesn’t seem to grow very much. They don’t do very well in a low interest rate environment. He would rather do something else with his money. Not his kind of investment.

After 2008, the Canadian insurance companies have become more conservative and defensive in terms of their practices. They spent a good few years after 2008 playing defence, and now for the 1^st time, they are slowly starting to play offense. This one is a good name, but he prefers Manulife (MFC-T).

Stock has been performing pretty well. Came off recently with the recent interest rate move. 10 year rates to the downside hurts insurers short term. Longer-term he believes that interest rates will rise, which will benefit these companies. Also, with demographics being the way they are, there is more demand for financial and retirement products, and insurance companies are good with these types of products. Expects them to continue having good growth. Their division in the US is doing well on the asset management side. Yield of 3.84%.

Has liked the insurers better than the banks over the last year, especially if you think interest rates are gradually going to move up. A great stock to own if you want a very steady dividend. Insurance companies try to match their assets and their liabilities. If you have rising interest rates their liabilities are shrinking, and if equity markets are rising, their assets are increasing. This is a good time to own them. This one also has a very significant stake in wealth management in Canada, which he thinks you will see do quite well eventually. Balance sheet is in really good shape. There might be a dividend bump down the road.

Has always liked this because it is more North American focused and has never been totally happy with Manulife (MFC-T) and their far eastern type investments. Right at the moment, they are both running and look cheap. The yields are okay. Since the banks have sort of backed off here and not left many choices of where to go for yield and relative safety, insurance companies look pretty good at the moment.

Stock vs. Stock: MFC-T vs. SLF-T. Owns MFC-T and not SLF-T. MFC’S growth over the next 3 years is higher in each year over SLF-T. MFC-T’s PE ratio is slightly higher. SLF-T is a great company and has been outperforming MFC-T, but going forward MFC-T can pick up their business. With their growth rate in Asia and in asset management, they will do particularly well.

Both MFC-T and SLF-T benefit from the same trends. Over time rates will rise and benefit their businesses. SLF-T has a stronger balance sheet. SLF-T talked about returning capital in the form of a dividend and share buybacks next year. He would wait until a hint of rates going up.

Life co. Prefers SLF-T, sold MFC-T because he prefers SLF-T’s business mix. High quality money management division.

If looking for some stability in your portfolio and something for the long-term, this is a great stock. He tends to like insurance companies a little bit better than banks here. Valuations are reasonable. Have really improved their capital ratios, and they have a lot of cash so they can start doing something interesting with that.