Dividend Stocks: Acquisitions support dividend increase for Sun Life Financial

Sun Life Financial has increased its quarterly dividend following the acquisition of Assurant Inc. That U.S. provider has also expanded the insurer’s offerings in key growth areas

SUN LIFE FINANCIAL (Toronto symbol SLF; www.sunlife.ca) sells life insurance, savings, retirement and pension products to individuals and corporations. The company has $861.5 billion of assets under management and mainly operates in Canada, the U.S. and the U.K. It’s also expanding in Asia.

In the three months ended March 31, 2016, Sun Life’s earnings per share rose 13.1%, to $0.95 from $0.84.

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The company continues to diversify in the U.S. At the same time, it is focused on highly profitable niche markets with low capital requirements.

Its latest move was last year’s purchase of the U.S. employee benefits unit of Assurant Inc. for $975 million U.S. It nearly doubles the size of Sun Life’s U.S. benefit business, to $4.0 billion worth of policies for over 64,000 employees of small, medium and large businesses. The company is now the sixth-largest U.S. benefits provider by revenue, up from ninth.

Dividend Stocks: Sun Life Financial dividend now yields 3.8%

The acquisition also adds leading dental and vision insurance products to Sun Life’s lineup, letting it cross-sell them to its existing clients. As well, Assurant has invested heavily in an advanced online enrollment and customer-service system. Sun Life can extend this system to its entire benefits business.

The stock trades at just 11.3 times the company’s forecast 2016 earnings of $3.74 a share. Sun Life raised its quarterly dividend by 3.8% with the June 2016 payment, to $0.405 from $0.39. The stock yields a high 3.8%.

Recommendation in Canadian Wealth Advisor: BUY

For our view on why dividend stocks should get even more respect from investors, read Never underestimate the power of Canadian dividend stocks.

For our recent report on a Canadian REIT with a strong yield that we rate as a buy, read RioCan cuts risk, protects distributions.

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Scott Clayton

Scott is an associate editor at TSI Network. He is the lead reporter and analyst for Dividend Advisor, Power Growth Investor and Canadian Wealth Advisor and a member of the Investment Planning Committee. Scott began his investment and financial career working with Pat McKeough at The Investment Reporter in the 1980s. Subsequently, he worked at the Financial Post Corporation Service for 10 years. He joined TSI Network in 1998. He is a Bachelor of Economics graduate of York University, and he also has an M.B.A. from the Schulich School of Business.

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