Could The Sun Life Financial Inc. (TSE:SLF) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
January 19, 2021

A look at the shareholders of Sun Life Financial Inc. (TSE:SLF) can tell us which group is most powerful. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Companies that used to be publicly owned tend to have lower insider ownership.

Sun Life Financial is a pretty big company. It has a market capitalization of CA$35b. Normally institutions would own a significant portion of a company this size. In the chart below, we can see that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about Sun Life Financial.

View our latest analysis for Sun Life Financial

TSX:SLF Ownership Breakdown January 19th 2021

What Does The Institutional Ownership Tell Us About Sun Life Financial?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in Sun Life Financial. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Sun Life Financial, (below). Of course, keep in mind that there are other factors to consider, too.

TSX:SLF Earnings and Revenue Growth January 19th 2021

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in Sun Life Financial. Our data shows that RBC Global Asset Management Inc. is the largest shareholder with 3.5% of shares outstanding. With 3.1% and 3.0% of the shares outstanding respectively, Royal Bank of Canada, Banking & Securities Investments and The Vanguard Group, Inc. are the second and third largest shareholders.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Sun Life Financial

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our most recent data indicates that insiders own less than 1% of Sun Life Financial Inc.. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own CA$13m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 50% ownership, the general public have some degree of sway over Sun Life Financial. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Sun Life Financial better, we need to consider many other factors.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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