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2 Dividend Stocks to Watch in the Booming Life Insurance Space
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The Zacks Life Insurance industry is well-poised to gain from re-evaluation and redesigning of products and policies, an improving interest rate environment, lower mortality rates and continuous technology investments.
Life insurers make efforts to include investment products that provide bundled coverage of retirement income, life and healthcare within their portfolios. A diversified portfolio is expected to boost the sales of life insurance policies on which the life insurers earn premiums, one of their most significant revenue components.
An increased number of people attaining retirement age indicates that an aging U.S. population is likely to push up demand for life insurance policies in the days ahead. Per Statista, around 16.9% of the American population was aged 65 years or above in 2020 and the percentage is anticipated to reach 22% by 2050. With the pandemic receding slowly, mortality rates have been declining for sometime. Lower mortality rates are a good sign for life insurers, leading to lower claim payments, and improving their underwriting results and combined ratios in the coming days.
Having exposure to rate-sensitive products and investments, investment yields of life insurers will reap benefits from an improving interest rate environment. With four rate hikes implemented by the Fed so far in 2022, multiple reports surfaced hinting at a probable rate increase of 50 basis points (bps) or 75 bps when the Fed meets this week. To tame high levels of inflation, it is most likely that the Fed will continue to hike interest rates.
Life insurers continue to make significant investments in technology like blockchain, AI, advanced analytics, telematics, cloud computing and robotic process automation. These advancements are expected to digitize the purchases of life insurance policies, and expedite claim payments and automation in processes. However, the heavy investments might escalate costs for insurers, putting pressure on the margins in the days ahead.
As bright industry prospects remain, investing in high-quality dividend stocks will provide stable income and protection from the volatile markets, which is a bonus for investors. These stocks can be relied on when it comes to long-term investment planning.
Best Dividend Stocks to Watch
With the help of the Zacks Stock Screener, we selected two life insurers, namely Sun Life Financial Inc. (SLF - Free Report) and Lincoln National Corporation (LNC - Free Report) . These stocks currently have a Zacks Rank #3 (Hold).
Sun Life Financial: With a market capitalization of $25.7 billion, the life insurer provides asset management, wealth, insurance and health solutions to individual and institutional clients. In May 2022, SLF announced a 4.5% raise in the dividend to reinforce its commitment to providing strong returns to its shareholders. Its dividend payout ratio is targeted within the 40-50% range.
A solid financial position coupled with a low leverage ratio provides flexibility and opportunity for further capital deployment. Sun Life Financial aims to maintain at least $500 million of cash and other liquid assets at the holding company. The current dividend yield of SLF stands at 4.9%, better than the industry average of 4%. The insurer’s payout ratio is 46, with a five-year dividend growth rate of 8.4%. (Check Sun Life Financial’s dividend history here)
Lincoln National: The life insurer, with a market capitalization of $8.4 billion, provides a varied array of wealth protection, accumulation, retirement income, and group protection products and solutions. In November 2021, the board of directors sanctioned a 7% dividend hike.
The financial position of Lincoln National looks strong with a solid cash balance that helped it prudently deploy capital through share buybacks and dividend hikes. LNC has a dividend yield of 3.7%, a payout ratio of 25 and boasts an annualized growth rate of 9% over the past five years. (Check Lincoln National’s dividend history here).
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2 Dividend Stocks to Watch in the Booming Life Insurance Space
The Zacks Life Insurance industry is well-poised to gain from re-evaluation and redesigning of products and policies, an improving interest rate environment, lower mortality rates and continuous technology investments.
Life insurers make efforts to include investment products that provide bundled coverage of retirement income, life and healthcare within their portfolios. A diversified portfolio is expected to boost the sales of life insurance policies on which the life insurers earn premiums, one of their most significant revenue components.
An increased number of people attaining retirement age indicates that an aging U.S. population is likely to push up demand for life insurance policies in the days ahead. Per Statista, around 16.9% of the American population was aged 65 years or above in 2020 and the percentage is anticipated to reach 22% by 2050. With the pandemic receding slowly, mortality rates have been declining for sometime. Lower mortality rates are a good sign for life insurers, leading to lower claim payments, and improving their underwriting results and combined ratios in the coming days.
Having exposure to rate-sensitive products and investments, investment yields of life insurers will reap benefits from an improving interest rate environment. With four rate hikes implemented by the Fed so far in 2022, multiple reports surfaced hinting at a probable rate increase of 50 basis points (bps) or 75 bps when the Fed meets this week. To tame high levels of inflation, it is most likely that the Fed will continue to hike interest rates.
Life insurers continue to make significant investments in technology like blockchain, AI, advanced analytics, telematics, cloud computing and robotic process automation. These advancements are expected to digitize the purchases of life insurance policies, and expedite claim payments and automation in processes. However, the heavy investments might escalate costs for insurers, putting pressure on the margins in the days ahead.
As bright industry prospects remain, investing in high-quality dividend stocks will provide stable income and protection from the volatile markets, which is a bonus for investors. These stocks can be relied on when it comes to long-term investment planning.
Best Dividend Stocks to Watch
With the help of the Zacks Stock Screener, we selected two life insurers, namely Sun Life Financial Inc. (SLF - Free Report) and Lincoln National Corporation (LNC - Free Report) . These stocks currently have a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Sun Life Financial: With a market capitalization of $25.7 billion, the life insurer provides asset management, wealth, insurance and health solutions to individual and institutional clients. In May 2022, SLF announced a 4.5% raise in the dividend to reinforce its commitment to providing strong returns to its shareholders. Its dividend payout ratio is targeted within the 40-50% range.
A solid financial position coupled with a low leverage ratio provides flexibility and opportunity for further capital deployment. Sun Life Financial aims to maintain at least $500 million of cash and other liquid assets at the holding company. The current dividend yield of SLF stands at 4.9%, better than the industry average of 4%. The insurer’s payout ratio is 46, with a five-year dividend growth rate of 8.4%. (Check Sun Life Financial’s dividend history here)
Sun Life Financial Inc. Dividend Yield (TTM)
Sun Life Financial Inc. dividend-yield-ttm | Sun Life Financial Inc. Quote
Lincoln National: The life insurer, with a market capitalization of $8.4 billion, provides a varied array of wealth protection, accumulation, retirement income, and group protection products and solutions. In November 2021, the board of directors sanctioned a 7% dividend hike.
The financial position of Lincoln National looks strong with a solid cash balance that helped it prudently deploy capital through share buybacks and dividend hikes. LNC has a dividend yield of 3.7%, a payout ratio of 25 and boasts an annualized growth rate of 9% over the past five years. (Check Lincoln National’s dividend history here).
Lincoln National Corporation Dividend Yield (TTM)
Lincoln National Corporation dividend-yield-ttm | Lincoln National Corporation Quote