CIBC & Manulife Financial: 2 High-Dividend Yield Financial Stocks

Summary

  • Amid current pandemic conditions, companies are struggling to stay afloat.
  • Many consistent dividend paying stocks have sliced or stopped their payouts (such as Air Canada).
  • However, few financial stocks like Canadian Imperial Bank of Commerce or CIBC (TSX: CM) and Manulife Financial Corporation (TSX: MFC) have continued to pay dividends to the shareholders.
  • Both the stocks have attractive dividend yields of over 5 per cent.

High income-generating stocks are always on the radar of investors. Generally, money-making stocks are those whose share value have surged over time or those that have high dividend yields. Amid the current pandemic conditions, income-generating stocks in both the categories have suffered. The stock prices and market valuation of traditional blue-chip or high value stocks have tumbled as companies struggled to stay afloat in this economic morass. At the same time, many consistent dividend stocks have sliced their payouts while some completing putting dividends on hold. Air Canada stocks fall in both the categories. The former blue-chip stock stopped its dividend payouts following its dramatic share price erosion and loss-making year due to COVID restrictions on aviation industry. Yet, there are handful stocks – such as Canadian Imperial Bank of Commerce or CIBC (TSX:CM) and Manulife Financial Corporation (TSX:MFC) that managed to emerge victorious in these pandemic times.

Both these financial stocks plunged in March during the pandemic-caused market crash. However, the stocks have slowly rebounded and the companies continued to pay dividends. Both the stocks have attractive dividend yields of over 5 per cent and were traded heavily on the Toronto Stock Exchange in recent times. Let us look at the analysis of the two stocks below:

Manulife Financial Corporation (TSX: MFC)

Stocks of the Toronto-based insurance and wealth management company are down 27 per cent this year. The scrips declined by two percent in last three months. Manulife Financial Corporation shares are trading at C$ 19.26 at the time of writing this.

However, in the last one month, stocks of Manulife are up 1.5 per cent, rising on high level of trading volumes. The C$ 37 billion-insurance company has an impressive dividend yield of 5.83 per cent. Its current earnings per share (EPS) is C$ 1.90. Price-to-earnings ratio is 9.90.

In the second quarter 2020, Manulife posted net income of C$ 0.7 billion, down C$ 0.7 billion year-over-year (YoY). Q2 revenue surged by 23.7 per cent YoY to C$ 27.5 billion. Core earnings grew five per cent YoY to C$ 1.6 billion in the second quarter. At the end of June 30, 2020, total assets under management and administration was C$ 1.2 trillion.

The insurance stocks’ return on equity is 8.15 per cent and return on assets 4.6 per cent presently. It announced quarterly dividends of C$ 0.28. In the last 12 months, Manulife reportedly paid C$ 30.6 billion in payments to customers in the form of claims and other benefits.

The company has over than 35,000 employees helping over 30 million customers worldwide. In Canada, the insurance company offers group benefits, retail segregated funds, retail insurance and Manulife bank – the country’s first branchless or digital bank. The company operates through its John Hancock wing in the US.

While Manulife’s US and Canadian businesses took a hit amid COVID, its Asian business wing surged. Profits in the second quarter rose 3.8 per cent to C$ 489 million in Asia. Manulife has insurance divisions in Vietnam, Singapore, Cambodia, Philippines, Hong Kong, Malaysia and Indonesia.

Canadian Imperial Bank of Commerce (TSX: CM)

CIBC stocks have a high dividend yield of 5.6 per cent. The top Canadian lender announced dividends of C$ 1.46 in the latest quarter.

In its latest earnings quarter report, the bank’s net income was C$ 1.17 billion or C$ 2.55 per diluted share, down 16 per cent YoY. The bank’s core segment – Canadian Personal and Business Banking – reported a net income of C$ 508 million, down 23 per cent a year ago. The Canadian Commercial Banking and Wealth Management wing reported net income of C$ 320 million, down seven per cent YoY. Meanwhile, the bank’s Capital Markets posted 67 per cent YoY decline in net income at C$ 392 million for the third quarter. The lenders’ top line also went down from C$ 4.732 billion in Q3/19 to C$ 4.708 in Q3/20.

(Source: CIBC)

Top bank officials said that the drop in profits was due to the credit loss provisions in back-to-back quarters in the first half of 2020.

The Toronto-based bank set aside a record C$ 525 million for bad loans in its third quarter, up C$ 234 million or 80 per cent YoY. All top lenders in Canada set aside unprecedented amounts as provisions for credit losses over COVID-19 pandemic impact and continued stress on oil prices.

CIBC stocks, which are currently down 3.7 per cent year-to-date, have picked up pace and are slowly recovering the lost ground. The shares surged by 6+ per cent in three months. In the last one month, CIBC stocks have surged by 11.22 per cent.

The scrips of the blue-chip company are trending high on TSX’s current list top stock price performer and top financial stocks. CIBC shares’ current return on equity is 10.64 per cent while current P/E ratio is 12.10.

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