Manulife Financial Corp (TSX:MFC)(NYSE:MFC) shares are on fire since Donald Trump was elected U.S. President, increasing nearly 20%.
The thought process is relatively simple. Investors think Trump’s big economic stimulus plan will force the Federal Reserve to finally hike interest rates. Life insurers have billions of dollars invested in bonds. Thus, higher rates will flow straight to the bottom line through better yields.
Additionally, companies like Manulife will be able to keep premiums relatively high, which will also help profits.
Manulife has more going for it than just the possibility of higher rates, however. It has spend years investing in its Asian operations, a move which is beginning to pay off. Earnings from the region are expected to hit close to $1 billion U.S. in 2016. Asia has quietly become Manulife’s main growth region.
It has also expanded further into wealth management. After good results thus far in 2016, the company is poised to increase assets under management to $1 trillion in 2017.
Manulife has made several acquisitions to bolster its U.S. operations as well. As it stands today, earnings from Canada, the United States, and Asia are split pretty evenly.
After cutting its dividend back in 2009, the company has done a nice job growing the payout. In 2014, it paid $0.13 per share each quarter. These days, the payout is $0.185, an increase of close to 50%.
There’s no danger of the dividend being cut again, either. The payout ratio is under 50%, and earnings are poised to go higher. Investors can count on the 3.2% yield.
