In many instances, Canadian investors tend to prioritize anchor holdings from the TSX’s predominant sectors of financials and energy. The financial sector includes banks and insurance companies, while the energy sector comprises oil and gas producers, as well as energy equipment and services providers.
Among the standout blue-chip stocks from each sector in 2024 are Suncor Energy and Manulife Financial. Both companies present strong potential as investment opportunities heading into the fourth quarter. In order to determine the better buy between the two, a comparative analysis will be conducted.
Suncor Energy is recognized as a prominent oil bellwether in North America and is notably known as a favored Canadian stock of Warren Buffett. Despite facing substantial losses during the 2020 oil price war and the coronavirus crisis, Suncor has demonstrated impressive recovery, showcasing profitability since 2021. The stock has also delivered a remarkable overall return of 126.2% (with a 31.2% compound annual growth rate) over the past three years.
As of current market conditions, investing in Suncor Energy would involve a share price of $50.47 per share, accompanied by a dividend yield of 4.3%. The stock has seen a year-to-date gain of 22.8%, and with a low 37% payout ratio, the quarterly payouts are deemed secure. Market analysts have issued a buy rating on the stock, with a 12-month average price target of $60.69.
Manulife Financial, on the other hand, is a substantial insurance and financial services provider with a market capitalization of $52 billion. The company has raised dividends per share by 67% over the past five years, with a recent increase of 9.6% on February 14, 2024. At a share price of $39.29, current investors have experienced a year-to-date return of 38.9% and benefit from a 4% dividend.
In the first half of 2024, Manulife Financial reported a 22% decline in net income year-over-year to $1.9 billion, while core earnings and new business value (NBV) increased by 11% and 28% to $3.5 billion and $1.4 billion, respectively, from the previous year. The company’s President and CEO, Roy Gori, emphasized Manulife’s strategic transformation towards a higher return and lower risk model, with notable growth momentum in key markets such as Asia.
In evaluating these blue-chip stocks, Suncor Energy and Manulife Financial are both well-established companies within their respective sectors, making them attractive options for investment. Depending on individual preference for sector exposure, combining these companies in a diversified portfolio could be a prudent strategy.
