Manulife Financial Corporation (TSX:MFC) is among the top insurance companies in Canada, as well as a leading insurer in other top markets around the world. The company has continued to grow its core business, while also expanding its presence in the wealth management market. Overall, I've viewed this stock as a buy in the past, and that thesis hasn't really changed.
However, I thought I'd take the time to provide my view on where this stock could be headed over the next one, three, and five years. Here's what investors may want to expect from this stock that's seen strong performance over these time periods thus far (one, three, and five-year returns of 76%, 77%, and 72%, respectively).
One-year outlook
Investors should note that the majority of the company's one, three and five-year returns have taken place over the past year. Another way of stating this dynamic is that Manulife has traded relatively rangebound in recent years, before breaking out.
Accordingly, given the company's recent momentum, I wouldn't be surprised to see this stock continue its momentum heading into 2025. With strong geopolitical tailwinds at its back (such as its continued expansion into Asian markets) and a positive outlook for global equities overall after recent political results in other key markets, this is a stock I think could be poised for decent near-term upside.
The insurance business in and of itself is kind of at an inflection point. When interest rates decline at the front end of the curve, profitability generally increases over time. Higher interest rates at the longer end of the yield curve (or an un-inverted yield curve) is a big deal for companies like Manulife, which try to match their long-term liabilities with assets. As these yields are locked in and come down, Manulife stands to benefit from a rising value in its investment portfolio, a trend I think will continue for the next year.
Three to five-year outlook
The next three to five years is a bit more murky for me. I think the majority of the aforementioned benefit Manulife might receive from interest rate movements will likely be eaten up in 2025. And we may not necessarily see the inversion in the yield curve completely diminish, particularly if inflationary forces pick up again. It's generally a yield game when it comes to bond-like proxies such as Manulife, so this is a key factor to pay attention to.
That said, I do think this is a dividend stock worth considering for its 3.6% dividend yield and relatively strong growth prospects over this timeframe. Even if the stock trades relatively rangebound after another strong year in 2025, it's worth holding. That's my two cents, as I see greater upside than many in the market, and greater value with this stock that trades at just 15 times earnings.
