What are we looking for?
Sustainable dividend income from Canadian insurers using international operations to bolster growth.
The screen
The top Canadian insurers with significant foreign exposure are all currently trading just below their recent all-time highs. Given strong prospects for growth outside of Canada’s relatively mature market, they’re poised to move even higher.
Sun Life Financial Inc. and Manulife Financial Corp. continue to benefit from their successful Canadian and U.S. operations but also their exposure to Asian markets. Other insurers are profiting from overseas customers as well – and not just in Asia, but in Britain, Europe and elsewhere.
International operations offer investors not just added growth prospects, but valuable regional and currency diversification.
From a list of Canadian life insurers, we identified leaders with steady or rising earnings plus the added appeal of international diversification. We then applied our TSI Dividend Sustainability Rating System. It awards points to a stock based on key factors:
- one point for five years of continuous dividend payments
- two points for more than five
- two points if it has raised the payment in the past five years
- one point for management’s commitment to dividends
- one point for operating in non-cyclical industries
- one point for limited exposure to foreign currency rates and freedom from political interference
- two points for a strong balance sheet, including manageable debt and adequate cash
- two points for a long-term record of positive earnings and cash flow sufficient to cover dividend payments
- one point for being an industry leader
Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.
More about TSI Network
TSI Network is the online home of the Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.
What we found
Our TSI Dividend Sustainability Rating System generated five stocks.
Sun Life Financial Inc. and Manulife Financial Corp., both headquartered in Toronto, are among Canada’s leading life insurers, with expanding interests in Asia. Another Toronto-based leader, Fairfax Financial Holdings Ltd., mainly sells insurance and reinsurance – both in Canada and around the world. It also manages a large investment portfolio that includes holdings in India and Greece.
Winnipeg-headquartered Great-West Lifeco Inc. is the top life insurer in Canada and the United States, but also in Britain and Europe. Montreal-headquartered holding company Power Corp. of Canada has controlling stakes in Great-West Lifeco as well as IGM Financial Inc. The latter is Canada’s largest independent mutual fund provider and further builds on Power’s regional and operational diversity.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.