Manulife Financial (TSX: MFC) has agreed to acquire the Canadian-based operations of Standard Life plc for about $4 billion in cash. A key reason for the acquisition is Standard Life’s operations in Quebec. They increase Manulife’s presence in a province in which it is underrepresented. And they build its capability to serve customers in all of Canada, and elsewhere in the world.
Manulife Financial is a leading Canada-based financial services company with principal operations in Asia, Canada and the U.S. Each of these areas represent about one third of the company’s overall business. The company offers a broad range of financial protection and wealth management products and services. It offers personal, commercial, corporate and investment banking products to millions of customers.
Manulife is having a good year. For the six months ended June 30, 2014, the company’s core earnings were $1.4 billion, or $0.73 a share, up 15.6 per cent from $1.2 billion, or $0.63 a share, in the same period of 2013. The increase was driven by higher fee income on higher assets under management, lower hedging costs, the release of a legal provision and a stronger U.S. dollar.
Not only has Manulife’s income increased. Its capital ratio, at 243 per cent, is above the minimum supervisory target of 150 per cent. Management thinks the company’s outlook is strong. And it’s also comfortable with the direction of international capital and regulatory standards. It, has, therefore, increased the company’s dividend for the first time since 2008. The dividend has been increased to $0.155 a share, up 19 per cent from $0.13 in prior quarters. The shares now yield 2.8 per cent.
Management says the dividend hike “is a very clear signal of the strength of the company”. We agree. The company appears to be well positioned to continue its profit increases next year and beyond. A good portion of these increases should come from Asia, where it has solid market share and demonstrated business expertise that dates back more than 100 years.
The stock trades at about 13.9 times the $1.58 a share in core earnings it will likely deliver in 2014.
Manulife is a buy for growth and some income.
Money Reporter, MPL Communications Inc.
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