Q: I have held MFC for decades, have enjoyed the dividend but have had less than 1% pa capital growth with lots of volatility. I am seeing PFE near five-year lows and paying a dividend yield slightly higher than MFC. MFC is in my RRIF so there are no capital gains or dividend taxation issues to consider. My weighting in health care stocks and financial stocks are about the same, so there are no sector allocation issues. MFC seems to be finally moving higher and the interest rate environment should help it in the longer term, making me wonder if I should hang in. Especially with MFC still trading around 8 x earnings, it could easily move up 50% and still trade at a multiple comparable to its financial peers. However, I am intrigued by the opportunity to switch into PFE for a better yield and longer term growth. Would you make the trade to PFE or stick with MFC?
5i Research Answer:
We have some PFE comments posted on Dec 1 in the Q&A. We would side with momentum and lower valuation here, and stick with MFC today in a straight-up contest without regard to sector.