Here’s a look at a recent TSI column for the Globe & Mail’s investing section. TSI analyst Scott Clayton outlines the Successful Investor approach to securing market-beating income from Canadian insurers with burgeoning global operations.
As a TSI subscriber, you’re already familiar with the insurers Scott spotlights here for the Globe’s thousands of readers across the country. Furthermore, you’re already reaping the benefits of TSI’s dividend quality ratings for these picks.
These insurers are particularly attractive for their strategic balance of stable domestic operations along with growth in international markets. This blend of solid Canadian foundations, global market penetration, and proven dividend performance positions them for capital appreciation and dependable income generation.
Excerpt from theglobeandmail.com, October 31, 2024
What are we looking for?
The sustainable dividends of Canadian insurers now profiting from overseas markets – in addition to their domestic ones.
The screen
Sun Life Financial Inc. reported strong third quarter results recently – and the stock soared to a new all-time high. It’s not alone, with other top Canadian insurers also hitting new highs.
Sun Life continues to benefit from its successful Canadian and U.S. operations but also its exposure to Asian markets. Other insurers are profiting from overseas customers as well – and not just Asia, but the U.K., Europe and elsewhere.
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International operations offer investors not just added growth prospects, but valuable regional and currency diversification.
From a list of Canadian life insurers, we identified leaders with steady growth prospects plus the added appeal of international diversification. We then applied our TSI Dividend Sustainability Rating System. It awards points to a stock based on key factors:
- One point for five years of continuous dividend payments – two points for more than five;
- Two points if it has raised the payment in the past five years;
- One point for management’s commitment to dividends;
- One point for operating in non-cyclical industries;
- One point for limited exposure to foreign currency rates and freedom from political interference;
- Two points for a strong balance sheet, including manageable debt and adequate cash;
- Two points for a long-term record of positive earnings and cash flow to cover dividends;
- One point if the company’s an industry leader.
Companies with 10 to 12 points have the most-secure dividends, or the highest sustainability. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.
Number Cruncher Stocks: Five Canadian insurers earn top marks the TSI way
What we found
Our TSI Dividend Sustainability Rating System generated five stocks:
Sun Life Financial Inc. (with a 4.0% yield), headquartered in Toronto, is among Canada’s leading life insurers, with expanding interests in Asia. (Dividend Sustainability Rating: 9 = Above Average)
Manulife Financial Corp. (3.5%), based in Toronto, is also a leading Canadian life insurer, and in turn has expanding interests in Asia. (Dividend Sustainability Rating: 9 = Above Average)
Fairfax Financial Holdings Ltd. (0.8%), another Toronto-based leader, mainly sells insurance and reinsurance – both in Canada and around the world. It also manages a large investment portfolio that includes holdings in India and Greece. (Dividend Sustainability Rating: 9 = Above Average)
Great-West Lifeco Inc. (4.5%), headquartered in Winnipeg, is top life insurer in Canada and the U.S. but also the U.K. and Europe. (Dividend Sustainability Rating: 9 = Above Average)
Power Corporation of Canada (4.8%), is a Montreal-headquartered holding company that has controlling stakes in Great-West Lifeco as well as IGM Financial Inc. The latter is Canada’s largest independent mutual fund provider and further builds on Power’s regional and operational diversity. (Dividend Sustainability Rating: 8 = Above Average)
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.
