MANULIFE FINANCIAL $12.53 - Toronto symbol MFC

MANULIFE FINANCIAL $12.53 (Toronto symbol MFC; Shares outstanding: 1.8 billion; Market cap: $22.1 billion; SI Rating: Above Average; Dividend yield: 4.2%) sells life and other forms of insurance, as well as mutual funds and investment-management services. It operates globally, and has $453.9 billion of assets under management. In the three months ended June 30, 2010, Manulife lost $2.4 billion, or $1.36 a share. Canada’s conservative accounting rules forced it to set aside $3.2 billion, mostly to increase reserves for its variable annuities. (Under U.S. accounting rules, it would have actually reported a small earnings increase in the latest quarter.) A year earlier, it earned $1.8 billion, or $1.09 a share. To cut risk, Manulife has hedged, or insured, more of its variable annuities against falling stock markets. Its hedges now cover 51% of these investments, up from 20% in 2009. It’s aiming for 70% by 2012. Rising stock markets or interest rates would help Manulife’s investment products and holdings. As well, it wouldn’t need all the reserves it has set aside, and could return them to profits. That could quickly turn around its results. Manulife’s balance sheet is sound, and its core insurance business in Canada and Asia remains strong.

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Blue chip stocks are big, well-established, dividend-paying corporations with strong business prospects. These are companies that also have sound management that should be able to make the right moves to keep competing successfully in a changing marketplace.

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Dividend stocks make cash payouts that serve as a way for companies to share the wealth they’ve accumulated. These payouts are drawn from earnings and cash flow and paid to the shareholders of the company. Typically, these dividends are paid quarterly, although they may be paid annually or even monthly as well.

Value Stocks

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One of the sweetest and most profitable pleasures of successful investing is to buy high-quality “value stocks” (or stocks that are reasonably priced, if not cheap, in relation to its sales, earnings or assets), then hold on to them as mainstream investors recognize the value and push up the share price.

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Energy Stocks

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