Financial giant Sun Life sells off assets, offering potential buyers an appealing opportunity for investment.
In the recent financial landscape, Sun Life's Q2 results have raised some intriguing opportunities for investors, particularly in the common shares. The share price decrease presents a potential entry point, but it's essential to delve deeper into the company's financials to fully understand the investment potential.
Sun Life's Q2 2025 total pre-tax income saw an impressive 7% increase, reaching C$976M. However, it's important to note that this figure includes certain one-time items, accounting adjustments, or volatile items. To gain a clearer picture of the company’s core operational performance, it's more beneficial to focus on the underlying earnings, which excludes these factors. In Sun Life's Q2 2025 report, underlying net income was C$1,015 million, up 2% year-over-year.
The discrepancy between reported earnings and underlying earnings is significant, as underlying earnings provide a better measure of sustainable profit. This is crucial for assessing the company’s ability to generate consistent cash flows to support dividend payments. Sun Life's underlying net income and return on equity remained solid at 17.6% in Q2 2025, demonstrating continued underlying profitability and operational strength.
Sun Life's dividend policy is centred around a payout ratio of 40% to 50% of the underlying net profit. The quarterly dividend on the common share stands at C$0.88, and the current yield of Series 8R is approximately 5.65%. Notably, Series 8R recently reset the dividend, locking in a 4.23% preferred dividend yield.
Investors seeking a hybrid approach could consider a combination of Sun Life's common shares and preferred shares. The common shares currently offer a dividend yield of approximately 4.5% with a payout ratio of approximately 70%. Meanwhile, the 4.45% preferred dividend yield based on the C$25 principal value per share of Series 3 and 4 implies a 5.2% preferred dividend yield.
Sun Life's strong presence in Canada, the United States, and Asia, as well as its robust history of paying dividends, make it an attractive option for investors. The net profit of Q2 2025 was roughly C$778M, of which C$735M was attributable to Sun Life. The total net investment result increased by 1% in Q2 2025, while fee income jumped by approximately 3%. In Q2 2025, Sun Life reported a net insurance service result of C$825M, a 2% increase from the same quarter the previous year.
As for the preferred shares, Series 3 and 4 are trading around C$21.4-21.8 per preferred share, and Series 8R is currently trading at C$18.73. It's worth noting that all preferred shares issued by Sun Life are non-cumulative in nature.
In conclusion, while reported earnings may be affected by non-recurring or non-operational factors, Sun Life's underlying performance supports stable dividends. The hybrid approach of investing in Sun Life's common shares and preferred shares could boost dividend income, making it an appealing option for income-focused investors.
[1] Sun Life Financial Q2 2025 Results News Release. (2025, July 28). Retrieved from https://www.sunlife.com/ca/en/about-us/investor-relations/financial-reports-and-presentations/quarterly-results/2025/q2/sun-life-financial-q2-2025-results-news-release
[2] Sun Life Financial 2025 Q2 Earnings Call Transcript. (2025, July 28). Retrieved from https://seekingalpha.com/symbol/NYSE:SLF/transcripts/9537846-sun-life-financial-inc-slf-q2-2025-earnings-call-transcript
[3] Sun Life Financial Q2 2024 Results News Release. (2024, July 29). Retrieved from https://www.sunlife.com/ca/en/about-us/investor-relations/financial-reports-and-presentations/quarterly-results/2024/q2/sun-life-financial-q2-2024-results-news-release
[4] Sun Life Financial Q2 2025 Earnings Release Supplement. (2025, July 28). Retrieved from https://www.sunlife.com/ca/en/about-us/investor-relations/financial-reports-and-presentations/quarterly-results/2025/q2/sun-life-financial-q2-2025-earnings-release-supplement
- The decrease in Sun Life's share price might attract investors, but a thorough examination of its financials is crucial, especially focusing on the underlying earnings to grasp the investment potential in personal-finance.
- Sun Life's strong underlying net income and solid return on equity highlight the company's operational strength in finance, which could support consistent cash flows for future dividend payments.
- A hybrid investing strategy involving Sun Life's common and preferred shares might appeal to income-focused investors, as it offers competitive dividend yields and a diverse investment portfolio across various business sectors.
