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Will Manulife Financial Help You Retire Rich?

Now more than ever, a comfortable retirement depends on secure, stable investments. Unfortunately, the right stocks for retirement won't just fall into your lap. In this series, I look at 10 measures to show what makes a great retirement-oriented stock.

Manulife Financial (NYSE: MFC  ) isn't a household name in the U.S., but it has a big presence both here and around the world. Headquartered in Canada, the company has a big international business in Asia and operates under the John Hancock name. With insurance companies having had a tough time in recent years, though, has Manulife's Canadian home sheltered it from the worst of the financial crisis? Below, we'll take a look at how Manulife Financial does on our 10-point scale.

The right stocks for retirees
With decades to go before you need to tap your investments, you can take greater risks, weighing the chance of big losses against the potential for mind-blowing returns. But as retirement approaches, you no longer have the luxury of waiting out a downturn.

Sure, you still want good returns, but you also need to manage your risk and protect yourself against bear markets, which can maul your finances at the worst possible time. The right stocks combine both of these elements in a single investment.

When scrutinizing a stock, retirees should look for:

  • Size. Most retirees would rather not take a flyer on unproven businesses. Bigger companies may lack their smaller counterparts' growth potential, but they do offer greater security.
  • Consistency. While many investors look for fast-growing companies, conservative investors want to see steady, consistent gains in revenue, free cash flow, and other key metrics. Slow growth won't make headlines, but it will help prevent the kind of ugly surprises that suddenly torpedo a stock's share price.
  • Stock stability. Conservative retirement investors prefer investments that move less dramatically than typical stocks, and they particularly want to avoid big losses. These investments will give up some gains during bull markets, but they won't fall as far or as fast during bear markets. Beta measures volatility, but we also want a track record of solid performance as well.
  • Valuation. No one can afford to pay too much for a stock, even if its prospects are good. Using normalized earnings multiples helps smooth out one-time effects, giving you a longer-term context.
  • Dividends. Most of all, retirees look for stocks that can provide income through dividends. Retirees want healthy payouts now and consistent dividend growth over time -- as long as it doesn't jeopardize the company's financial health.

With those factors in mind, let's take a closer look at Manulife Financial.


What We Want to See


Pass or Fail?

Size Market cap > $10 billion $24.5 billion Pass
Consistency Revenue growth > 0% in at least four of five past years 3 years Fail
  Free cash flow growth > 0% in at least four of past five years 2 years Fail
Stock stability Beta < 0.9 1.41 Fail
  Worst loss in past five years no greater than 20% (57.5%) Fail
Valuation Normalized P/E < 18 18.28 Fail
Dividends Current yield > 2% 3.9% Pass
  5-year dividend growth > 10% (5.1%) Fail
  Streak of dividend increases >= 10 years 0 years Fail
  Payout ratio < 75% 20.9% Pass
  Total score   3 out of 10

Source: S&P Capital IQ. Total score = number of passes.

With only three points, Manulife Financial doesn't have the traits that conservative investors like to see in a stock. The insurer suffered through a dividend cut and a big drop in share price three years ago, and it really hasn't recovered much from that experience.

Manulife sells life insurance and annuity products, and those offerings have hurt the company's results. During the market meltdown, Manulife and peers Lincoln National (NYSE: LNC  ) and Hartford Financial (NYSE: HIG  ) took big losses in part because of guarantees they had made on their annuity products against risk of loss. Similar problems arose in its long-term care insurance offerings. In response, Manulife has asked for rate increases on long-term care insurance premiums to bolster its profits.

One area where Manulife has done well is in its fixed-income mutual fund offerings. The company grew its assets in the sector by 87% over the past year. Along with funds from Wells Fargo (NYSE: WFC  ) , T. Rowe Price (Nasdaq: TROW  ) , and many others, Manulife's John Hancock won a number of honors at the prestigious Lipper Fund Awards announced earlier this month.

For retirees and other conservative investors, the big black mark against Manulife is its lagging share price and stagnant dividend. Manulife needs to get back on the growth track in order to reassure investors that the stock belongs in their retirement portfolios.

Keep searching
Finding exactly the right stock to retire with is a tough task, but it's not impossible. Searching for the best candidates will help improve your investing skills and teach you how to separate the right stocks from the risky ones.

If you really want to retire rich, no single stock will get the job done. Instead, you need to know how to prepare for your golden years. The Motley Fool's latest special report will give you all the details you need to get a smart investing plan going, plus it reveals three smart stocks for a rich retirement. But don't waste another minute -- click here and read it today.

Add Manulife Financial to My Watchlist, which will aggregate our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned in this article. The Fool owns shares of and has created a covered strangle position in Wells Fargo. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.

Read/Post Comments (1) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 21, 2012, at 8:06 PM, MissB963 wrote:


    I own 272.40 shares of the MFC stock that I acquired via 1 John Hancock share that I ownd through my company and was offered a chance to buy more or sell the one share I had.

    Since you're saying this is a bad choice for retirement, would it be feasible to transfer it to my twin grandsons who are now 1 year old and just leave it?

    I am 1 day old in investing so I don't have the lingo or the knowledge at this time, just the desire to be able to pay my bills, finance some dreams and help my daughter and grandsons live better, much better than I have.

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Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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