Tags: Sun | dividend | earnings | SLF

Sun Life Financial: Great Dividend, Earnings Risk

By    |   Thursday, 13 Oct 2011 05:22 PM

Canadian insurance and investments firm Sun Life Financial (SLF) has an attractive dividend yield but faces earnings risk in the current interest rate environment. The company does benefit from its position as a top benefits provider in Canada as well as a strong sales position in the United States and Asia.

SLF shares trade on both the Toronto and New York stock exchanges. Sun Life provides life and health insurance plus investment and retirement plan products. In Canada, the company sells individual insurance policies and has an extensive group benefits business.

In the United States, Sun Life owns the MFS Investment Management mutual fund company and sells life insurance and annuity products. The bulk of the U.S. insurance business is variable annuity sales. The Asian business consists of life insurance sales in the Philippines, Indonesia, and China.

Based on the 2011 second quarter results, just over half of Sun Life's operating income comes from Canadian operations. U.S. insurance sales contribute a quarter of earnings and MFS Financial produced 15 percent. Asian contributions are under 10 percent of operating income.

Flat earnings

Diluted annual earnings per share since 2007 have been $2.84, negative $1.36, $4.12, and $2.42 respectively. The current consensus estimate for 2011 is $3.02 per share. Earnings have fluctuated with changes in interest rates and the 2008 negative earnings were due to portfolio losses as a result of the financial crisis.

That said, consistency of earnings has not been a trait of Sun Life Financial. The dividend, however, has been consistent. The quarterly rate of 36 cents per share has been in effect since February 2008. The dividend rate puts the yield above 6 percent when the share price is below $24.

Recently, Barclays Capital analysts downgraded Sun Life Financial to market weight from overweight. Analyst Andre-Philippe Hardy with RBC Capital Markets stated he expects a significant earnings contraction for the company in the third quarter due to both the decline in the stock markets and falling interest rates.

The company next reports on Nov. 2.


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Canadian insurance and investments firm Sun Life Financial (SLF) has an attractive dividend yield but faces earnings risk in the current interest rate environment. The company does benefit from its position as a top benefits provider in Canada as well as a strong sales...
Sun,dividend,earnings,SLF
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2011-22-13
Thursday, 13 Oct 2011 05:22 PM
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