Recessions can be scary things, and at the moment it seems that investors have been targeted and out of a recession for decades. That is of course not true. We have seen periods of high growth, followed by drops in the market, and offer year after year of changing. Yet there is one area that can see investors through every type of volatility, recession or otherwise. These are insurance shares.
Why insurance
Although insurance shares may not get newspaper heads, these are shares that can survive any recession. Insurance is an essential industry, a service that people do not cancel if times become difficult. Whether at home, car, health or life insurance policy, we all need protection. And that question means that cash will continue to flow.
Moreover, insurance shares not only receive premiums, but also investing. In a recession, this means that the interest rates are shifting down, making the best opportunity to jump in and buy a large portfolio of bonds and other safe assets. These offer a stable financial pillow to keep cash safe.
Moreover, recessions can actually be semi-good news for insurance shares. This is where the price force arrives. Companies with strong balance can endure the storm, while weaker players are eliminated. With conservative discipline, these larger companies only get bigger, and even offer increasing increase in dividends that investors can look forward to during difficult times.
Consider MFC
So, if you are worried about a recession, what is an insurance stock to consider? In this case I would consider Manulife Financial (TSX: MFC). These insurance shares not only offers the resilience of the insurance field, but also the diversification of a global stock. It keeps income stable, even in slower economies of its investment in Canada, the United States and Asia.
In fact, the investment in Asia is a growth motor that can be a huge catalyst for future growth. Insurance penetration is still low, but the question climbs. This can compensate for any delays in North America, making future growth in dividends and returns possible.
As a result, investors witnessed during the recent income, in which the insurance shares reported US $ 1.9 billion in core revenues, an increase of 14% on an annual basis. The net result rose to US $ 1.7 billion, with new business value (NBV) by 18% – all driven by a strong and increasing demand in Asia.
Bottom Line
The topping on this delicious ice cream cell? That dividend. Manulife shares, as well as other insurance shares, offer quarterly dividends. In the case of MFC, the dividend is currently around 5.5%. That is a huge increase in the annual income, while it also offers a stable payout ratio with around 40% when writing. So not only can investors look forward to income, but also again in income growth.
If you are worried about a recession, MFC is a great way to go to bed with nothing but happy thoughts that fill your head. No stress, no fear, only income that comes back in for decades. So if this sounds like something you are interested in, you will meet your financial adviser for more research into Manulife shares and other insurance shares today.
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