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Sun Life Financial (SLF) on Growth Track: Should You Hold?

Shares of Sun Life Financial Inc SLF have gained 22.47% year to date, outperforming the Zacks categorized Life Insurance industry that lost 0.56%. The Zacks Rank #3 (Hold) life insurance company has witnessed its full-year estimates moving north over the last 60 days.

Why the Stock Should be in Your Portfolio

Sun Life is aggressively developing its business in Asia, which in turn, is boosting operational results and is expected to provide higher return and growth than the North American markets. Over the past three years, net income from Asian operations has doubled and the value of new business increased threefold.

Sun Life is shifting its focus toward products (mutual funds and group benefits) that require lower capital and offer more predictable earnings. The company is concentrating on international life insurance, growing its voluntary benefits business and vying for a place among the top five players.

Furthermore, Sun Life is aggressively trying to grow its Global Asset Management Business, which has been witnessing an increase in asset base over the past many quarters. The life insurer targets Sun Life Investment Management asset under management of approximately $100 billion over the next five years.

Sun Life has been enhancing its shareholders’ value by increasing dividend. With the latest hike in Nov 2016, the company increased its dividend by 8% this year. Sun Life targets dividend payout between 40% and 50%. The company currently has a dividend yield of 3.28%, which compares favorably with the industry average of 1.70%. This not only retains investor confidence but also makes the stock an attractive pick for yield-seeking investors.

Based on its operational strength, the company expects bottom-line growth between 8% and 10% and ROE between 12% and 14% over the medium term. The company also targets financial leverage ratio if 25% over the long term.

Valuation is also attractive at present as the stock is currently trading at a forward P/E of 13.3x, a 8.9% discount to the industry average of 14.0x. On a price-to-book basis, shares are trading at 1.5x compared with the industry average of 1.6x. Sun Life has a trailing 12-month return on equity (ROE) of 12.4%, which is higher than the industry average of 7.0%.

The long-term expected earnings growth is pegged at 5.8%. Also, the price earnings growth ratio, which determines the relative trade-off between the price of a stock, earnings generated per share, and the company's expected growth, is 2.31, which is above the industry average of -0.70. 

Stocks to Consider

Some better-ranked insurers are Health Insurance Innovations, Inc. HIIQ, Primerica, Inc. PRI and. FBL Financial Group Inc. FFG.

Health Insurance, which is a developer, distributor, and administrator of cloud-based individual health and family insurance plans, and supplemental products in the U.S., beat estimates in all of the last four quarters with an average positive surprise of 270.8%. The company sports Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.  

Primerica – a distributor of financial products to middle income households in the U.S. and Canada – delivered positive surprises in the trailing four quarters with an average beat of 6.4%. The company has Zacks Rank #2 (Buy).

FBL Financial, which sells annuity and individual life insurance products, surpassed estimates in two of the last four quarters with an average positive surprise of 3.26%. The company carries Zacks Rank #2.

Zacks' Top 10 Stocks for 2017

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
PRIMERICA INC (PRI): Free Stock Analysis Report
 
SUN LIFE FINL (SLF): Free Stock Analysis Report
 
FBL FINL GRP-A (FFG): Free Stock Analysis Report
 
HEALTH INS INN (HIIQ): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research

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