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Here's Why Hold is an Apt Strategy for Sun Life (SLF) Stock

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Sun Life Financial Inc. SLF is poised for growth on a compelling Asia business, growing global asset management business and favorable business mix. A solid balance sheet and favorable growth estimates make Sun Life stock worth retaining in one’s portfolio.

This third-largest insurer in Canada has a solid track record of beating earnings estimates in the last nine quarters, with the average being 11.85%.

Zacks Rank & Price Performance

Sun Life currently carries a Zacks Rank #3 (Hold). In a year, the stock has gained 16% against the industry’s decrease of 6.9%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Growth Projections

The Zacks Consensus Estimate for 2022 earnings is pegged at $5.16, indicating an increase of 8.8% from the year-ago reported figure.

Sun Life targets bottom-line growth of 8-10% per annum over the medium term. The expected long-term earnings growth rate is currently pegged at 9%.

Return on Equity (ROE)

ROE for the trailing 12 months is 14.1%, comparing favorably with the industry’s 11.4% and reflecting SLFs’ efficiency in utilizing shareholders’ fund. Given the ongoing shift to fee-based capital-light businesses, Sun Life raised its medium-term ROE objectives to 16% from 12% to 14% expected earlier.

Style Score

Sun Life has a favorable VGM Score of B. This style score rates stocks on their combined weighted styles, helping to identify those with the most attractive value, best growth, and momentum.

Business Tailwinds

Boasting a leading position in individual insurance, group benefits and group retirement service in the Canadian market, Sun Life leaves no stone unturned to capitalize on growth opportunities in Canada.

Sun Life has been strengthening its presence in China, the Philippines, India, Hong Kong, Indonesia, Malaysia, Singapore and Vietnam to expand in Asia’s largest and fastest-growing markets.

Sun Life Investment Management’s continued efforts to accelerate investment capabilities in private fixed income, mortgages and real estate by investing in pension plans and institutional investors ensure the expansion of the Wealth and Asset Management business.

Sunlife remains focused on building scale and capabilities through mergers and acquisitions and strategic partnerships. Strategic buyouts have positioned it as the second-largest dental network in the United States, consolidated its footprint in Vietnam, Indonesia and India and expanded its wealth business in Hong Kong, and added to its real-estate capabilities.

Sun Life is shifting its growth focus toward products that park lower capital and offer more predictable earnings to improve the business mix.

Banking on operational excellence, Sun Life hikes dividends and engages in share buybacks apart from pursuing greet initiatives, reflecting effective use of capital. Its current dividend yield of 3.8% is better than the industry average of 3.7%. Sun Life targets a dividend payout ratio in the range of 40-50% in the medium term. It generated a five-year total shareholder return of 13%.

A healthy capital and cash position along with a low leverage ratio provide flexibility and opportunity for further capital deployment. Sun Life targets a leverage of 25 over the long term.

Stocks to Consider

Some better-ranked stocks from the insurance space include Hallmark Financial Services HALL, Brighthouse Financial BHF, and Berkshire Hathaway (BRK.B).

The Zacks Consensus Estimate for Hallmark Financial’s 2022 earnings stands at 40 cents, up 60% from year ago reported figure. Hallmark Financial, sporting a Zacks Rank #1, delivered a four-quarter average earnings surprise of 53.62%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Brighthouse Financial carries a Zacks Rank #2. The Zacks Consensus Estimate for 2022 has moved up 3.8% in the past seven days. Brighthouse delivered a four-quarter average earnings surprise of 67.61%.

Berkshire carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2022 earnings has moved up by 0.8% in the past 60 days. The expected long-term earnings growth rate is pegged at 7%. Berkshire delivered a four-quarter average earnings surprise of 5.53%.

Shares of Hallmark Financial, Brighthouse Financial and Berkshire have gained 33.5%, 38% and 33.1% in a year’s time.

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

Berkshire Hathaway Inc. (BRK.B) : Free Stock Analysis Report

Sun Life Financial Inc. (SLF) : Free Stock Analysis Report

Hallmark Financial Services, Inc. (HALL) : Free Stock Analysis Report

Brighthouse Financial, Inc. (BHF) : Free Stock Analysis Report

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