Investors who missed the rally are now questioning whether MFC stock or CM stock is still undervalued and a good buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio targeting dividends and total returns.
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Manulife
Manulife trades near $40, up from $25 this time last year. This impressive performance is due to successful efforts in de-risking the business and implementing digital solutions. The company has also benefited from rising interest rates, which have enhanced returns on the significant cash reserves required for potential claims.
Notably, Manulife is experiencing solid growth in its Asia business. Core earnings for the first half of 2024 reached $3.49 billion, compared to $3.17 billion in 2023. Asia core earnings increased by 40%, while Canada and the U.S. recorded gains of 5% and 2%, respectively. The Global Wealth Management sector, anchored by John Hancock operations, saw core earnings jump 24%. Currently, Manulife offers a dividend yield of 4%.
CIBC
CIBC trades around $82, rising from $51 a year ago. After a significant pullback, the stock began to recover as fears of rising interest rates shifted to expectations of rate cuts in 2024. The Bank of Canada has already reduced rates by 0.75%, with further cuts anticipated.
The market is currently expecting a soft economic landing, with the unemployment rate in Canada hitting 6.6% in August. Investors should monitor this closely, given the risks to households if job losses occur. In contrast, the U.S. saw a slight dip in unemployment to 4.1%. CIBC’s dividend yield stands at 4.4%.
Is One a Better Pick?
Both stocks have performed well, but caution is warranted due to their recent runs. New investors may want to wait for a pullback before entering the market. If choosing between the two, Manulife appears more attractive, given its lower exposure to the Canadian housing market and diversified global operations. As we head into 2025, these factors could provide a safer investment outlook.
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In summary, both Manulife and CIBC have shown substantial growth over the past year. However, prospective investors should weigh their options carefully, considering the differing risk exposures and potential for future returns.