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MetLife: Capitalizing With An Industry Leader

May 06, 2020 10:34 AM ETMetLife, Inc. (MET)BHF, GNW17 Comments
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Equanimity Investing


  • MetLife increased its dividend by 4.5%, marking its fourth hike in the last four years.
  • Brighthouse spinoff proved to be an excellent strategic shift and LTC exposures are capped.
  • Investment portfolio is almost entirely investment grade quality and the Fed put helps backstop credit losses.
  • Shares sell for 0.55x tangible book value, a decade low multiple.

The coronavirus has hit financial sector earnings as interest rates have been retrenched back to the zero lower-bound, insurance claims have slightly risen, and commercial loan losses have surfaced. However, with the Federal Reserve growing its balance sheet by nearly $3 trillion, or 75% quarter-over-quarter, it has provided an unprecedented willingness to backstop financial markets. The Fed is purchasing U.S. treasuries, MBS, municipal bonds, ABS, commercial paper, and investment grade bonds. If the market cannot price credit risk in these asset classes properly, then the underwriters and intermediaries stand to benefit the most, i.e. financials. Fortunately, investors can take advantage of this ongoing dynamic - consider MetLife (NYSE:MET).

MetLife may not provide an outstanding total return opportunity for investors given the sector is generally out of favor in this low-growth environment, however the company can certainly generate decent returns for investors, while providing a hefty dividend stream along the way.

Capital Return

MetLife has maintained a very strong balance sheet, where A.M. Best and the three rating agencies rated all subsidiaries of MetLife between A+ to AA, falling into the highest tiers of credit quality. In late April, MetLife raised $1 billion in bonds to increase its total cash and liquid assets to more than $5 billion. Despite the ravaging effects of the coronavirus on the broader economy, MetLife has so far brushed it off. Of course, the business has significant macro exposures, so we'll see the extent of the headwinds unfold with first quarter earnings. Fortunately, management decided to preemptively raise the quarterly dividend distribution to $0.46/share, up from $0.44 last quarter. CEO, Michel Khalaf, was happy with the decision: "We are pleased that our financial strength enables us to increase our common stock quarterly dividend, which provides a steady and growing income to millions of people during this economically challenging time." This hike actually runs on the back of three prior dividend increases in the last few years:

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This article was written by

Equanimity Investing profile picture
Equanimity Research helps you focus on protecting your principal and thinking long-term with your investments. I'm long treasuries, select high-quality companies, and will never use margin. As a generalist, I cover multiple sectors with a dividend and non-dividend long-only stock strategy over a 5-10+ year investment horizon. I also cover macroeconomics regarding monetary policy and excessive debt levels globally.All articles/blogs are for informational and entertainment purposes only. Under no circumstances should any of these articles/blogs or any published information be interpreted as investment advice, or as an offer to buy/sell any financial security. Perform your own due diligence. I welcome comments and corrections of all kinds.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in MET over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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