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Marathon Petroleum and Ciena Corporation have been highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – October 14, 2022 – Zacks Equity Research shares Marathon Petroleum (MPC - Free Report) as the Bull of the Day and Ciena Corporation (CIEN - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on CNA Financial Corp. (CNA - Free Report) , Manulife Financial Corp. (MFC - Free Report) and Unum Group (UNM - Free Report) .
Marathon Petroleum, a Zacks Rank #1 (Strong Buy), has been a substantial beneficiary of the energy surge this year. The stock has gone on to rally to new all-time highs while the general market continues to hover in bear territory. With inflation stubbornly lingering as we’ve seen over the past few months, MPC is set to continue its dominant trend.
MPC sports the highest-possible ‘A’ rating in each of our Zacks Value, Growth, and Momentum Style Score categories, indicating an increased likelihood that the stock continues to propel higher. The powerful combination of relative undervaluation and positive earnings estimate revisions should serve bullish MPC investors well into the future.
Marathon Petroleum is a component of the Zacks Oil & Gas – Refining and Marketing industry, which currently ranks in the top 1% out of approximately 250 industry groups. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform the market over the next 3 to 6 months.
Quantitative research studies suggest that approximately half of a stock’s future price appreciation is due to its industry grouping. By targeting stocks contained within leading industry groups, we can dramatically improve our odds of success.
Company Description
Marathon Petroleum, headquartered in Findlay, Ohio, is engaged in refining, transporting and marketing of petroleum products. MPC also manufactures aromatics, propane, propylene, and sulfur. The company sells refined products to wholesale marketing customers in the United States and internationally.
MPC stores and distributes crude oil through pipelines, terminals, and barges. Furthermore, it gathers and transports natural gas liquids. Operating in 37 states, the District of Columbia, and Mexico, the energy giant was founded in 1887.
Recent Earnings and Future Estimates
MPC has been on a hot streak in terms of earnings surprises, beating estimates in each of the past four quarters – with an average beat of 56.68%. Back in August, the company reported Q2 EPS of $10.61/share, a +15.7% surprise over the $9.17 consensus estimate. When a company is consistently exceeding estimates by this wide of a margin, it typically creates a ‘tailwind’ and boosts price momentum.
Revenues for the second quarter of $54.2 billion also topped estimates by 63.08%. MPC has surpassed revenue estimates in each of the last four quarters.
In the past 60 days, analysts have raised their Q3 EPS projections by +9.02%. The Zacks Consensus EPS Estimate now stands at $6.89 per share, reflecting astounding growth of 843.84% relative to the same quarter last year.
Charting the Course
MPC is up nearly 75% this year alone, widely outperforming the major indices. Only stocks that are in extremely powerful uptrends are able to weather bear markets and corrections so gracefully. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. And as we know, MPC has seen a recent batch of positive revisions. As long as this trend remains intact (and MPC continues to post earnings beats), the stock should continue its bullish run into next year.
Other Factors to Consider
Marathon Petroleum remains focused on enhancing shareholder value. The company currently pays a $2.23 (2.2%) dividend.
In addition, MPC repurchased $4.1 billion worth of shares during Q2 and has now completed more than 80% of its target to buy back $15 billion in common stock.
Bottom Line
As an established veteran in the industry, MPC trends remain favorable amid strength in the energy sector. Buoyed by an undervalued and leading industry group along with a maximum overall Zacks VGM score of ‘A,’ it’s not difficult to see why MPC is a compelling investment.
A history of large earnings surprises along with a strong technical trend certainly warrant a closer look at this top-rated stock. Recent positive earnings estimate revisions should also serve to create a ‘floor’ in terms of any sudden or unexpected downside moves. If you’re looking for a way to diversify your portfolio, make sure to put MPC on your shortlist.
Ciena Corporation is a global service provider that supports the routing, delivery, and management of video, data, and voice traffic on communications networks. The company offers hardware networking products, operating system software, multi-domain services and analytics. CIEN sells its products through direct and indirect sales channels to various network operators.
The Zacks Rundown
CIEN, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Fiber Optics industry group, which ranks in the bottom 1% out of more than 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months. This industry has underperformed the market at nearly every turn this year.
Candidates in the bottom tiers of industries can often be solid potential short candidates. While individual stocks have the ability to outperform even when included in a poor-performing industry group, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
CIEN experienced a climax top in December of last year and has been in a price downtrend ever since. The share price is hitting a series of 52-week lows and represents a compelling short opportunity as the market continues its downward momentum into the fourth quarter.
Recent Earnings Misses & Deteriorating Outlook
CIEN has fallen short of estimates in three of the last four quarters. The networking company most recently reported fiscal Q3 earnings last month of $0.33/share, missing the $0.35/share consensus EPS estimate by -5.71%. CIEN has posted a trailing four-quarter average earnings miss of -3.57%. Consistently falling short of earnings estimates is a recipe for underperformance, and CIEN is no exception.
Ciena has been on the receiving end of negative earnings estimate revisions as of late. For the fiscal fourth quarter, analysts have decreased estimates by 89.61% in the past 60 days. The Q4 Zacks Consensus EPS Estimate is now $0.08/share, reflecting a -90.59% regression relative to the same quarter last year.
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
Technical Outlook
As illustrated below, CIEN is in a sustained downtrend. The stock is making a series of lower lows, with no respite from the selling in sight. Both moving averages have rolled over and are sloping down – another good sign for the bears. Shares have fallen nearly 48% this year alone.
While not the most accurate indicator, CIEN has also experienced what is known as a “death cross”, wherein the stock’s 50-day moving average crosses below its 200-day moving average. CIEN would have to make a serious move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock.
Final Thoughts
A worsening fundamental and technical backdrop show that this stock is not set to make its way back to new highs anytime soon. The fact that CIEN is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
Our Zacks Style Scores depict a weakening outlook for this stock, as CIEN is rated a worst-possible ‘F’ in our both our Growth and Value categories, paving the way for another ‘F’ in our overall VGM score. While this market remains quite difficult, it’s easy to understand why investors should steer clear of this poorly rated stock.
Additional content:
Economic uncertainty worsened in the first half of 2022 due to the Russia-Ukraine conflict, a tight monetary policy undertaken by the Federal Reserve and high inflation. In the past year, the S&P 500 index has declined 20.4%. Volatility is expected to continue in the remainder of 2022.
Amid this, insurance players like CNA Financial Corp., Manulife Financial Corp. and Unum Group are expected to brave industry headwinds. These have an impressive dividend history and are likely to yield promising returns. Dividends play an important role in limiting portfolio risk as well as market volatility. Regular dividend hikes also indicate profitability of the insurer.
The insurance industry is benefiting from improved pricing, increased technology advancements, exposure growth and global expansion as well as an impressive solvency level. Prudent underwriting standards, lower mortality rates, redesigning and repricing of products and services and an improving rate environment should also add to the upside.
Per the Global Insurance Market Index by Marsh, global commercial insurance prices increased 9% in the second quarter of 2022. This marked the 19th consecutive quarter in which composite pricing rose, continuing the longest run of increases since the inception of the index in 2012. Per Marsh, global property insurance pricing and casualty pricing increased 6% each on average in the second quarter of 2022.
Pricing in financial and professional lines had the highest rate of increase across the major insurance product categories at 16%. Per Willis Towers Watson’s 2022 Insurance Marketplace Realities report, rates will continue to rise but by a small margin. Better pricing will help insurers write higher premiums and address claims payment prudently. Per Deloitte insights, global non-life premiums are estimated to grow 3.7% in 2022.
Price hikes, operational strength, higher retention, strong renewal and the appointment of retail agents should help write higher premiums.
With a rise in the aging population, the demand for retirement benefits is increasing. Per a report by IBISWorld, the $909 billion U.S. Life Insurance & Annuities Market is expected to grow 2.5% in 2022. Increased vaccinations and economic growth potential instill confidence.
The insurers remain exposed to catastrophe loss from natural disasters and weather-related events, which induce volatility in their underwriting results. Per Colorado State University (CSU), the 2022 above-average hurricane season may have 19 named storms, including nine hurricanes and four major hurricanes. This year’s hurricane season could be about 130% of the average season per CSU. Global estimated insured losses from natural catastrophes in the first half of 2022 were $35 billion, 22% above average of the past 10 years ($29 billion), per a report by Swiss Re Institute.
Exposure growth, better pricing, prudent underwriting and favorable reserve development will help withstand the blow. Also, frequent occurrences of natural disasters should accelerate the policy renewal rate.
The interest rate environment has started to improve. The Fed declared the third consecutive 75 basis point increase in the Federal Funds rate. Currently, the interest rate is in the range of 3%-3.25%. Insurers, being direct beneficiaries of an improving rate environment, are poised to gain. To check high levels of inflation, the Fed will continue to rise interest rates, which will improve investment results.
Banking on operational efficiency, which leads to a solid capital position, insurers continue to engage in strategic mergers and acquisitions to diversify their operations into new business lines and geography and deploy capital to enhance shareholder value.
Insurers have increased investment in emerging technologies in a bid to drive efficiency, enhance cybersecurity, upgrade policy administration and claims systems as well as expand automation capabilities across the organization. Deloitte’s Global survey projects insurers’ technology budget to increase 13.7% in 2022.
CNA Financial, with a market capitalization of $10.2 billion, offers commercial P&C insurance products, mainly across the United States. Riding on a compelling product portfolio, better retention, improving pricing, and new business growth, CNA Financial has been witnessing improvement in gross premium written since 2015, with each of the segments delivering improved gross premium written.
Its strong balance sheet and cash flows enable CNA Financial to engage in shareholder-friendly moves like dividend hikes. The company’s quarterly dividend payment has witnessed an eight-year CAGR (2015-20222) of 6.1%. The current dividend yield of 4.2% is better than the industry average of 0.4%. In February 2022, CNA Financial’s board approved a 5% hike in the quarterly dividend.
Simultaneously, CNA announced a special dividend of $2 per share, marking the eighth special dividend. CNA increased its dividend six times in the last five years. The property and casualty insurer’s payout ratio is 41, with a five-year annualized dividend growth rate of 5.6%. (Check CNA Financial’s dividend history here).
CNA Financial maintains a conservative capital structure, a leverage ratio of 22.6% and capital above target levels in support of ratings. By virtue of disciplined execution, as reflected in its strong underwriting results, and confidence in future earnings performances, the insurer has hiked its dividend over the past couple of years. CNA remains committed to returning more value to shareholders.
Manulife Financial, with a market capitalization of $29.4 billion, is one of the three dominant life insurers within its domestic market and has rapidly growing operations in the United States and several Asian countries. The insurer’s strong Asia business and expanding wealth and asset management business poise it well for growth.
MFC's current dividend yield of 6.7% betters the industry average of 4.2%. Manulife has a strong track record of delivering progressive dividend increases. The life insurer’s payout ratio is 41, with a five-year annualized dividend growth rate of 9.6%. Manulife Financial increased its dividend 14 times in the last five years. (Check Manulife Financial’s dividend history here)
A solid balance sheet, along with strong operational performance and the life insurer’s outlook for growth in the future, has enabled it to hike its dividend payout. In November 2021, MFC increased the total dividend by 18%. It targets a 35-45% dividend payout over the medium term. Its Asia business is the major contributor to its earnings.
New business growth in Asia has been aiding the operational results. MFC remains focused on ramping up growth in its highest potential businesses, and thus estimates these businesses to generate about 67% of total company core earnings by 2022.
Unum Group, with a market capitalization of $8.1 billion, is ranked as the leading disability income writer and the second-largest writer of voluntary business in the United States. By virtue of sustained solid operational performance, favorable benefits experience as well as solid top-line growth in the core businesses, UNM witnessed favorable operating results across the majority of its insurance entities. Unum’s conservative pricing and reservation practices have contributed to its overall profitability.
UNM’s quarterly dividend payment witnessed an eight-year CAGR (2015-2022) of 9.5%. The board approved a quarterly dividend hike of 10% in May 2022, marking the 13th dividend hike in the last 12 years. The current dividend yield of 3.2%, is better than the industry average of 2.7%. UNM increased its dividend four times in the last five years. The insurer’s payout ratio is 23, with a five-year annualized dividend growth rate of 6.2%. (Check Unum Group’s dividend history here).
Unum Group boasts a solid capital position. Sustained solid operating results have been fueling a solid level of statutory earnings and capital, cushioning financial flexibility. Strong statutory earnings might provide an impetus to its dividend capacity. Unum Group has consistently enhanced shareholders’ value through dividend hikes. Its continuous efforts to reduce share count are expected to bolster earnings going forward.
For the remainder of 2022, the insurer projects an increase in after-tax adjusted operating income per share of 40% to 45% year over year, up from an increase of 15% to 20% guided earlier. The improved expectation reflects the insurer's strong first-half performance. UNM estimates 45-55% growth in adjusted operating EPS by 2024.
Why Haven’t You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Marathon Petroleum and Ciena Corporation have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – October 14, 2022 – Zacks Equity Research shares Marathon Petroleum (MPC - Free Report) as the Bull of the Day and Ciena Corporation (CIEN - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on CNA Financial Corp. (CNA - Free Report) , Manulife Financial Corp. (MFC - Free Report) and Unum Group (UNM - Free Report) .
Here is a synopsis of all five stocks.
Bull of the Day:
Marathon Petroleum, a Zacks Rank #1 (Strong Buy), has been a substantial beneficiary of the energy surge this year. The stock has gone on to rally to new all-time highs while the general market continues to hover in bear territory. With inflation stubbornly lingering as we’ve seen over the past few months, MPC is set to continue its dominant trend.
MPC sports the highest-possible ‘A’ rating in each of our Zacks Value, Growth, and Momentum Style Score categories, indicating an increased likelihood that the stock continues to propel higher. The powerful combination of relative undervaluation and positive earnings estimate revisions should serve bullish MPC investors well into the future.
Marathon Petroleum is a component of the Zacks Oil & Gas – Refining and Marketing industry, which currently ranks in the top 1% out of approximately 250 industry groups. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform the market over the next 3 to 6 months.
Quantitative research studies suggest that approximately half of a stock’s future price appreciation is due to its industry grouping. By targeting stocks contained within leading industry groups, we can dramatically improve our odds of success.
Company Description
Marathon Petroleum, headquartered in Findlay, Ohio, is engaged in refining, transporting and marketing of petroleum products. MPC also manufactures aromatics, propane, propylene, and sulfur. The company sells refined products to wholesale marketing customers in the United States and internationally.
MPC stores and distributes crude oil through pipelines, terminals, and barges. Furthermore, it gathers and transports natural gas liquids. Operating in 37 states, the District of Columbia, and Mexico, the energy giant was founded in 1887.
Recent Earnings and Future Estimates
MPC has been on a hot streak in terms of earnings surprises, beating estimates in each of the past four quarters – with an average beat of 56.68%. Back in August, the company reported Q2 EPS of $10.61/share, a +15.7% surprise over the $9.17 consensus estimate. When a company is consistently exceeding estimates by this wide of a margin, it typically creates a ‘tailwind’ and boosts price momentum.
Revenues for the second quarter of $54.2 billion also topped estimates by 63.08%. MPC has surpassed revenue estimates in each of the last four quarters.
In the past 60 days, analysts have raised their Q3 EPS projections by +9.02%. The Zacks Consensus EPS Estimate now stands at $6.89 per share, reflecting astounding growth of 843.84% relative to the same quarter last year.
Charting the Course
MPC is up nearly 75% this year alone, widely outperforming the major indices. Only stocks that are in extremely powerful uptrends are able to weather bear markets and corrections so gracefully. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. And as we know, MPC has seen a recent batch of positive revisions. As long as this trend remains intact (and MPC continues to post earnings beats), the stock should continue its bullish run into next year.
Other Factors to Consider
Marathon Petroleum remains focused on enhancing shareholder value. The company currently pays a $2.23 (2.2%) dividend.
In addition, MPC repurchased $4.1 billion worth of shares during Q2 and has now completed more than 80% of its target to buy back $15 billion in common stock.
Bottom Line
As an established veteran in the industry, MPC trends remain favorable amid strength in the energy sector. Buoyed by an undervalued and leading industry group along with a maximum overall Zacks VGM score of ‘A,’ it’s not difficult to see why MPC is a compelling investment.
A history of large earnings surprises along with a strong technical trend certainly warrant a closer look at this top-rated stock. Recent positive earnings estimate revisions should also serve to create a ‘floor’ in terms of any sudden or unexpected downside moves. If you’re looking for a way to diversify your portfolio, make sure to put MPC on your shortlist.
Bear of the Day:
Ciena Corporation is a global service provider that supports the routing, delivery, and management of video, data, and voice traffic on communications networks. The company offers hardware networking products, operating system software, multi-domain services and analytics. CIEN sells its products through direct and indirect sales channels to various network operators.
The Zacks Rundown
CIEN, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Fiber Optics industry group, which ranks in the bottom 1% out of more than 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months. This industry has underperformed the market at nearly every turn this year.
Candidates in the bottom tiers of industries can often be solid potential short candidates. While individual stocks have the ability to outperform even when included in a poor-performing industry group, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
CIEN experienced a climax top in December of last year and has been in a price downtrend ever since. The share price is hitting a series of 52-week lows and represents a compelling short opportunity as the market continues its downward momentum into the fourth quarter.
Recent Earnings Misses & Deteriorating Outlook
CIEN has fallen short of estimates in three of the last four quarters. The networking company most recently reported fiscal Q3 earnings last month of $0.33/share, missing the $0.35/share consensus EPS estimate by -5.71%. CIEN has posted a trailing four-quarter average earnings miss of -3.57%. Consistently falling short of earnings estimates is a recipe for underperformance, and CIEN is no exception.
Ciena has been on the receiving end of negative earnings estimate revisions as of late. For the fiscal fourth quarter, analysts have decreased estimates by 89.61% in the past 60 days. The Q4 Zacks Consensus EPS Estimate is now $0.08/share, reflecting a -90.59% regression relative to the same quarter last year.
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
Technical Outlook
As illustrated below, CIEN is in a sustained downtrend. The stock is making a series of lower lows, with no respite from the selling in sight. Both moving averages have rolled over and are sloping down – another good sign for the bears. Shares have fallen nearly 48% this year alone.
While not the most accurate indicator, CIEN has also experienced what is known as a “death cross”, wherein the stock’s 50-day moving average crosses below its 200-day moving average. CIEN would have to make a serious move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock.
Final Thoughts
A worsening fundamental and technical backdrop show that this stock is not set to make its way back to new highs anytime soon. The fact that CIEN is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
Our Zacks Style Scores depict a weakening outlook for this stock, as CIEN is rated a worst-possible ‘F’ in our both our Growth and Value categories, paving the way for another ‘F’ in our overall VGM score. While this market remains quite difficult, it’s easy to understand why investors should steer clear of this poorly rated stock.
Additional content:
Economic uncertainty worsened in the first half of 2022 due to the Russia-Ukraine conflict, a tight monetary policy undertaken by the Federal Reserve and high inflation. In the past year, the S&P 500 index has declined 20.4%. Volatility is expected to continue in the remainder of 2022.
Amid this, insurance players like CNA Financial Corp., Manulife Financial Corp. and Unum Group are expected to brave industry headwinds. These have an impressive dividend history and are likely to yield promising returns. Dividends play an important role in limiting portfolio risk as well as market volatility. Regular dividend hikes also indicate profitability of the insurer.
The insurance industry is benefiting from improved pricing, increased technology advancements, exposure growth and global expansion as well as an impressive solvency level. Prudent underwriting standards, lower mortality rates, redesigning and repricing of products and services and an improving rate environment should also add to the upside.
Per the Global Insurance Market Index by Marsh, global commercial insurance prices increased 9% in the second quarter of 2022. This marked the 19th consecutive quarter in which composite pricing rose, continuing the longest run of increases since the inception of the index in 2012. Per Marsh, global property insurance pricing and casualty pricing increased 6% each on average in the second quarter of 2022.
Pricing in financial and professional lines had the highest rate of increase across the major insurance product categories at 16%. Per Willis Towers Watson’s 2022 Insurance Marketplace Realities report, rates will continue to rise but by a small margin. Better pricing will help insurers write higher premiums and address claims payment prudently. Per Deloitte insights, global non-life premiums are estimated to grow 3.7% in 2022.
Price hikes, operational strength, higher retention, strong renewal and the appointment of retail agents should help write higher premiums.
With a rise in the aging population, the demand for retirement benefits is increasing. Per a report by IBISWorld, the $909 billion U.S. Life Insurance & Annuities Market is expected to grow 2.5% in 2022. Increased vaccinations and economic growth potential instill confidence.
The insurers remain exposed to catastrophe loss from natural disasters and weather-related events, which induce volatility in their underwriting results. Per Colorado State University (CSU), the 2022 above-average hurricane season may have 19 named storms, including nine hurricanes and four major hurricanes. This year’s hurricane season could be about 130% of the average season per CSU. Global estimated insured losses from natural catastrophes in the first half of 2022 were $35 billion, 22% above average of the past 10 years ($29 billion), per a report by Swiss Re Institute.
Exposure growth, better pricing, prudent underwriting and favorable reserve development will help withstand the blow. Also, frequent occurrences of natural disasters should accelerate the policy renewal rate.
The interest rate environment has started to improve. The Fed declared the third consecutive 75 basis point increase in the Federal Funds rate. Currently, the interest rate is in the range of 3%-3.25%. Insurers, being direct beneficiaries of an improving rate environment, are poised to gain. To check high levels of inflation, the Fed will continue to rise interest rates, which will improve investment results.
Banking on operational efficiency, which leads to a solid capital position, insurers continue to engage in strategic mergers and acquisitions to diversify their operations into new business lines and geography and deploy capital to enhance shareholder value.
Insurers have increased investment in emerging technologies in a bid to drive efficiency, enhance cybersecurity, upgrade policy administration and claims systems as well as expand automation capabilities across the organization. Deloitte’s Global survey projects insurers’ technology budget to increase 13.7% in 2022.
Best 3 Dividend Stocks to Watch
With the help of the Zacks Stock Screener, we have selected three insurance stocks with a dividend yield of more than 2% and they have grown dividends over the past five years. These stocks also have a payout ratio of less than 60 and carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CNA Financial, with a market capitalization of $10.2 billion, offers commercial P&C insurance products, mainly across the United States. Riding on a compelling product portfolio, better retention, improving pricing, and new business growth, CNA Financial has been witnessing improvement in gross premium written since 2015, with each of the segments delivering improved gross premium written.
Its strong balance sheet and cash flows enable CNA Financial to engage in shareholder-friendly moves like dividend hikes. The company’s quarterly dividend payment has witnessed an eight-year CAGR (2015-20222) of 6.1%. The current dividend yield of 4.2% is better than the industry average of 0.4%. In February 2022, CNA Financial’s board approved a 5% hike in the quarterly dividend.
Simultaneously, CNA announced a special dividend of $2 per share, marking the eighth special dividend. CNA increased its dividend six times in the last five years. The property and casualty insurer’s payout ratio is 41, with a five-year annualized dividend growth rate of 5.6%. (Check CNA Financial’s dividend history here).
CNA Financial Corporation dividend-yield-ttm | CNA Financial Corporation Quote
CNA Financial maintains a conservative capital structure, a leverage ratio of 22.6% and capital above target levels in support of ratings. By virtue of disciplined execution, as reflected in its strong underwriting results, and confidence in future earnings performances, the insurer has hiked its dividend over the past couple of years. CNA remains committed to returning more value to shareholders.
Manulife Financial, with a market capitalization of $29.4 billion, is one of the three dominant life insurers within its domestic market and has rapidly growing operations in the United States and several Asian countries. The insurer’s strong Asia business and expanding wealth and asset management business poise it well for growth.
MFC's current dividend yield of 6.7% betters the industry average of 4.2%. Manulife has a strong track record of delivering progressive dividend increases. The life insurer’s payout ratio is 41, with a five-year annualized dividend growth rate of 9.6%. Manulife Financial increased its dividend 14 times in the last five years. (Check Manulife Financial’s dividend history here)
Manulife Financial Corp dividend-yield-ttm | Manulife Financial Corp Quote
A solid balance sheet, along with strong operational performance and the life insurer’s outlook for growth in the future, has enabled it to hike its dividend payout. In November 2021, MFC increased the total dividend by 18%. It targets a 35-45% dividend payout over the medium term. Its Asia business is the major contributor to its earnings.
New business growth in Asia has been aiding the operational results. MFC remains focused on ramping up growth in its highest potential businesses, and thus estimates these businesses to generate about 67% of total company core earnings by 2022.
Unum Group, with a market capitalization of $8.1 billion, is ranked as the leading disability income writer and the second-largest writer of voluntary business in the United States. By virtue of sustained solid operational performance, favorable benefits experience as well as solid top-line growth in the core businesses, UNM witnessed favorable operating results across the majority of its insurance entities. Unum’s conservative pricing and reservation practices have contributed to its overall profitability.
UNM’s quarterly dividend payment witnessed an eight-year CAGR (2015-2022) of 9.5%. The board approved a quarterly dividend hike of 10% in May 2022, marking the 13th dividend hike in the last 12 years. The current dividend yield of 3.2%, is better than the industry average of 2.7%. UNM increased its dividend four times in the last five years. The insurer’s payout ratio is 23, with a five-year annualized dividend growth rate of 6.2%. (Check Unum Group’s dividend history here).
Unum Group dividend-yield-ttm | Unum Group Quote
Unum Group boasts a solid capital position. Sustained solid operating results have been fueling a solid level of statutory earnings and capital, cushioning financial flexibility. Strong statutory earnings might provide an impetus to its dividend capacity. Unum Group has consistently enhanced shareholders’ value through dividend hikes. Its continuous efforts to reduce share count are expected to bolster earnings going forward.
For the remainder of 2022, the insurer projects an increase in after-tax adjusted operating income per share of 40% to 45% year over year, up from an increase of 15% to 20% guided earlier. The improved expectation reflects the insurer's strong first-half performance. UNM estimates 45-55% growth in adjusted operating EPS by 2024.
Why Haven’t You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
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