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Why Manulife Financial (MFC) is a Top Dividend Stock for Your Portfolio

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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Manulife Financial in Focus

Manulife Financial (MFC - Free Report) is headquartered in Toronto, and is in the Finance sector. The stock has seen a price change of 8.53% since the start of the year. Currently paying a dividend of $0.21 per share, the company has a dividend yield of 4.35%. In comparison, the Insurance - Life Insurance industry's yield is 0.4%, while the S&P 500's yield is 1.42%.

Taking a look at the company's dividend growth, its current annualized dividend of $0.84 is up 1.1% from last year. In the past five-year period, Manulife Financial has increased its dividend 4 times on a year-over-year basis for an average annual increase of 11.41%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Manulife's current payout ratio is 41%. This means it paid out 41% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, MFC expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $2.36 per share, representing a year-over-year earnings growth rate of 15.12%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, MFC is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).


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