Added more Sun Life to Portfolio
The nice thing about being a long term investor that focuses on dividends and dividend growth is that when stock prices go down yields go up. Canadian financial services firm Sun Life Financial (SLF) offered up a dividend yield of 3.7% this past week as the stock was sold off further after a negative earnings report due to U.S. operation weakness. The analyst downgrades, including Credit Suisse, also came right on cue which encouraged more selling.
When the smoke cleared toward the closing bell Friday I had to add to my position to lower my cost base. This was just too tempting to pass up:
- As far as I can see, 3.7% is the highest this stock has ever yielded in its history
- Earnings were up 6% in their Canadian operations within a tough market
- The stock traded at these levels in late 2004 when the trailing 12-month earnings per share (EPS) was $2.88; trailing EPS is now $3.83
- My valuation models using discounted cash flow (using an EPS growth rate of 9% and a P/E of 11x) show that the stock should be bought under a share price of about $45.00 (I bought today at about $38.60/share)
- Price/Earnings ratio is right around 10x trailing earnings which has to be considered good value for a company with very low debt, a juicy yield, and a solid earnings and dividend growth history.
This purchase lowered my adjusted cost base (ACB) by about $3/share. Sun Life Financial (SLF) now makes up about 9% of my non-registered portfolio.
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