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Here's Why You Should Invest in Sun Life Financial (SLF) Stock

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Sun Life Financial (SLF - Free Report) is well-poised for growth on the strength of its strong presence in Asia, expansion of its global asset management and a sturdy financial position.

The Zacks Consensus Estimate for 2020 and 2021 earnings has moved up 7.4% and 4.3%, respectively in the past 30 days, reflecting analysts’ optimism.  

Return on equity of 14.1% in the trailing 12 months was better than the industry average of 10.8%, reflecting the company’s efficiency in utilizing shareholders’ funds. The company estimates generating underlying ROE of 12-14% over the medium term.

Sun Life remains focused on expanding its international business and thus is focusing on the emerging economies of Asia that are expected to provide higher return and growth than the North American markets. The third largest insurer in Canada has a strong presence in China, Philippines, India, Hong Kong and Indonesia, and has also forayed into Malaysia and Vietnam.

The life insurer envisions being a leader in Asia through distribution excellence in higher growth markets and identifies bancassurance as a high-growth distribution channel in Vietnam. Thus, recently along with Asia Commercial Joint Stock Bank, it formed a 15-year exclusive bancassurance partnership in Vietnam. Also, last November, Sun Life Vietnam and Tien Phong Commercial Bank (TPBank) formed a 15-year bancassurance partnership in Vietnam.

Sun Life considers acquisitions a prudent approach to ramp up its growth. It is focusing on products that park lower capital and offer more predictable earnings. In October 2020, Sun Life agreed to acquire Crescent Capital Group, the $28-billion worth credit manager. Sun Life is seeking to make investment in the private credit domain, which ensures greater yield, thus creating an opportunity to generate higher income.

Sun Life is continually growing its Global Asset Management business that has been witnessing a rise in asset base for the past many quarters.  The company currently has $0.9 trillion assets under management.

This Zacks Rank #1 (Strong Buy) life insurer aims underlying earnings per share growth of 8-10% per annum over the medium term.

Sun Life Financial had a strong capital and cash position along with a low leverage ratio of 21.5% at the end of the third quarter 2020. The company targets leverage of 25% over the long-term.

Its stable cash flow profile supports an attractive annual dividend, yielding 3.6%, and betters the industry average of 3.3%, making this an attractive pick for yield-seeking investors.  The company expects dividend payout ratio of 40-50% of earnings over the medium term.

Shares of Sun Life Financial have lost 0.6% year to date, narrower than the industry's decline of 15.7%.

Other Stocks to Consider

Investors interested in the insurance space can look at Brighthouse Financial (BHF - Free Report) , Manulife Financial (MFC - Free Report) and Primerica (PRI - Free Report) , each carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank.
Brighthouse delivered an earnings surprise of 26.59% in the last reported quarter.

Manulife delivered an earnings surprise of 5.77% in the last reported quarter.

Primerica delivered an earnings surprise of 16.81% in the last reported quarter.

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