The life insurance industry seems to have strong growth prospects this year, driven by record premiums and rising consumer confidence. High interest rates boost investment income, while AI and data tools enhance policy personalization and risk management. These advancements improve customization and attract more customers, further boosting the sector’s outlook.
Hence, income investors could consider investing in strong insurance stocks such as Lincoln National Corporation (LNC), Manulife Financial Corporation (MFC), and Prudential Financial, Inc. (PRU), which have high dividend yields.
Life insurance industry’s advances in AI technology are transforming the sector by speeding up applications and personalizing policies. This trend boosts demand through improved customer experiences, faster processes, and accurate risk assessments. Hence, the U.S. life insurance market is projected to reach $1.27 trillion in premiums by 2024.
Furthermore, the U.S. life insurance market is expected to grow from $765.38 billion in 2023 to $1.48 trillion by 2032 with a 7.1% CAGR, driven by technological innovations and increased digitalization. Enhanced accessibility and efficiency support a positive outlook, while rising health awareness and shifting demographics boost demand, making it a promising investment opportunity.
Considering these conducive trends, let’s analyze the fundamental aspects of the three Insurance - Life picks, starting with the third choice.
Stock #3: Lincoln National Corporation (LNC)
LNC and its subsidiaries operate multiple insurance and retirement businesses in the United States. It operates in four segments: Life Insurance, Annuities, Group Protection, and Retirement Plan Services.
On July 24, 2024, LNC announced a partnership with Philadelphia Eagles quarterback Jalen Hurts to promote financial wellness and community engagement. This collaboration extends their 20-year relationship with the Eagles and includes joint efforts between the Lincoln Financial Foundation and the Jalen Hurts Foundation.
On May 16, 2024, LNC announced the launch of Lincoln Level Advantage 2, an enhanced index-linked annuity with exclusive Capital Group ETF options and the new Secure Lock+ feature. This product provides increased growth opportunities and control, marking a significant upgrade from its previous version.
In terms of forward non-GAAP P/E, LNC’s 5.18x is 54.1% lower than the 11.28x industry average. Its 0.43x forward EV/Sales is 85.9% lower than the 3.09x industry average. Similarly, its 4.99x forward EV/EBITDA is 55.8% lower than the 11.31x industry average.
LNC has paid dividends for 34 consecutive years. Its annual dividend is $1.80, which translates to a yield of 6% at the current share price. Its four-year average dividend yield is 4.66%. Moreover, the company’s dividend payouts have increased at a CAGR of 2.7% over the past three years.
LNC’s revenues for the second quarter ended June 30, 2024, increased 75.9% year-over-year to $5.15 billion. Its adjusted income from operations available to common stockholders was $319 million, or $1.84 per share. Additionally, its net income available to common stockholders and EPS were $884 million and $5.11, up 76.1% and 73.8% year-over-year, respectively.
Street expects LNC’s EPS for the quarter ending September 30, 2024, to increase 643.7% year-over-year to $1.71. Its revenue for the quarter ending December 31, 2024, is expected to grow 136.1% year-over-year to $4.64 billion. Over the past nine months, the stock has gained 29.8% to close the last trading session at $30.02.
LNC’s POWR Ratings reflect strong prospects. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #21 out of 26 stocks in the B-rated Insurance - Life industry. It has an A grade for Momentum and a B for Value. Click here to see LNC’s ratings for Growth, Stability, Sentiment, and Quality.
Stock #2: Manulife Financial Corporation (MFC)
Headquartered in Toronto, Canada, MFC and its subsidiaries provide financial products and services internationally. The company operates through Wealth and Asset Management, Insurance and Annuity Products, and Corporate and Other segments.
In terms of forward EV/EBITDA, MFC’s 9.59x is 2.3% lower than the 9.81x industry average. Likewise, its 9.28x forward non-GAAP P/E is 17.7% lower than the 11.28x industry average. Also, its 1.13x forward Price/Sales is 58.4% lower than the 2.72x industry average.
MFC pays an annual dividend of $1.15, which translates to a yield of 4.66% at the current share price. Its four-year average dividend yield is 5.05%. In addition, the company’s dividend payouts have increased at a CAGR of 8.6% over the past three years. MFC has paid dividends for the past 23 years.
During the fiscal first quarter ended March 31, 2024, MFC’s core revenue grew 6.7% year-over-year to $1.87 billion. Similarly, the company’s core earnings and core EPS were $1.75 billion and $0.94, up 14.6% and 19% from the year-ago values, respectively. In addition, its adjusted book value per share increased 11.2% compared to the prior-year quarter, reaching $33.39.
For the quarter ended June 30, 2024, MFC’s EPS and revenue are expected to increase 2.5% and 281% year-over-year to $0.63 and $4.92 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 35% to close the last trading session at $24.74.
MFC’s robust outlook is reflected in its POWR Ratings. MFC has an A grade for Momentum. Within the same industry, it is ranked #18. To see MFC’s ratings for Growth, Value, Stability, Sentiment, and Quality, click here.
Stock #1: Prudential Financial, Inc. (PRU)
PRU and its subsidiaries provide insurance, investment management, and other financial products and services internationally. It operates through the PGIM, Retirement Strategies, Group Insurance, Individual Life, and International Businesses segments.
On May 7, 2024, PRU declared a quarterly dividend of $1.30 per share of common stock, payable on June 13, 2024. Shareholders must be on record by May 21, 2024, to receive the dividend.
In terms of forward EV/Sales, PRU’s 0.97x is 68.5% lower than the 3.09x industry average. Its 0.85x forward non-GAAP PEG is 30.9% lower than the 1.23x industry average. Likewise, its 8.27x forward non-GAAP P/E is 26.8% lower than the 11.28x industry average.
PRU has paid dividends for 19 consecutive years. PRU’s annualized dividend of $5.20 per share translates to a dividend yield of 4.72% on the current share price. Its four-year average yield is 4.92%. Moreover, the company’s dividend payouts have increased at a CAGR of 4.3% over the past three years.
For the second quarter ended June 30, 2024, PRU’s after-tax adjusted operating income was $1.23 billion, or $3.09 per share, representing increases of 8.1% and 9.7% year-over-year, respectively. The company’s net income attributable to PRU and EPS increased 134.4% and 137.7% from the year-ago values, reaching $1.20 billion and $3.28, respectively.
Analysts expect EPS and revenue for the quarter ending September 30, 2024, to increase 3.5% and 14.3% year-over-year to $3.56 and $13.95 billion, respectively. PRU’s stock has gained 20.3% over the past nine months to close the last trading session at $110.26.
PRU’s strong fundamentals are reflected in its POWR Ratings. It is ranked #16 in the Insurance – Life industry. It has an A grade for Momentum and a B for Growth. To access PRU’s grades for Value, Stability, Sentiment, and Quality, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
MFC shares were trading at $24.26 per share on Monday afternoon, down $0.48 (-1.94%). Year-to-date, MFC has gained 12.37%, versus a 9.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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