Manulife Financial (TSX:MFC), one of Canada's largest insurance and financial services companies, continues to be a standout for dividend income seekers. With a long-standing history of reliable dividend payments, a growing global presence, and a commitment to shareholder returns, Manulife offers a compelling case for income-focused investors. But with its current dividend yield and recent performance, the question remains: is it a buy right now?

Looking back

At its current trading price of around $45.30 as of writing, Manulife stock has experienced strong market performance over the past year. This growth trajectory is reflected in its market capitalization, now standing at a robust $79.5 billion. Such performance underlines not only the company's resilience but also the market's confidence in its operations and future prospects.

Manulife's dividends are a key attraction for income investors. The forward annual dividend rate stands at $1.60 per share, translating to a forward annual yield of approximately 3.5%. While slightly below its five-year average yield of 5%, this is still competitive in the financial services sector. Additionally, its payout ratio of 55.5% strikes a healthy balance, ensuring that the company retains enough earnings to fuel growth while rewarding shareholders consistently.

The company's financials paint a picture of strength and stability. Manulife reported a profit margin of 19% and an operating margin of 28.4% over the trailing 12 months, demonstrating its ability to efficiently manage operations and generate profits. Net income attributable to common shareholders came in at $5.1 billion, with diluted earnings per share (EPS) of $2.82. These figures underscore its capacity to maintain and even increase dividends, bolstered by its substantial cash reserves of $28.8 billion.

More to come

A significant highlight for Manulife is its strategic focus on Asian markets. The company operates in 12 Asian countries and has over 100 bank partnerships, thereby making this region a critical driver of its future growth. In its second-quarter 2024 earnings report, Manulife stock revealed a 40% increase in earnings from its Asia business, showing that this strategy is paying off handsomely. The growing middle class in Asia and increasing demand for financial services position Manulife stock to capture substantial market share in the coming years.

Manulife stock's balance sheet remains solid, with a total debt of $22 billion and a manageable debt-to-equity ratio of 42.5%. Its financial stability ensures that the company can continue funding growth initiatives, servicing its debt, and maintaining shareholder payouts. Furthermore, the company generated impressive operating cash flow of $25.5 billion, further supporting its ability to cover dividend payments and invest in future opportunities.

Despite its strong fundamentals and appealing dividend, Manulife stock's current valuation may give investors pause. With a trailing price-to-earnings (P/E) ratio of 16.1 and a forward P/E ratio of 11.3, the stock appears reasonably priced. Yet it's not a screaming bargain compared to some historical valuations. For investors focused on dividend yield alone, the current rate of 3.5% is attractive but not as high as it has been in prior years. That said, the company's growth potential and stable financial performance may justify its valuation for those with a long-term horizon.

Bottom line

Manulife stock is undoubtedly a strong contender for dividend income investors, offering a combination of consistent payouts, a growing global presence, and solid financial health. While its current yield of 3.5% is below its historical average, it remains competitive in the market. Whether it's a buy now depends on your investment goals. For those seeking immediate high yields, there may be better options. But for investors willing to hold onto a stable, growth-oriented company with reliable income potential, Manulife stock remains an excellent choice.