Sun Life Financial Inc. (TSE:SLF) is favoured by institutional owners who hold 53% of the company

By
Simply Wall St
Published
April 17, 2022
TSX:SLF
Source: Shutterstock

To get a sense of who is truly in control of Sun Life Financial Inc. (TSE:SLF), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 53% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.

In the chart below, we zoom in on the different ownership groups of Sun Life Financial.

See our latest analysis for Sun Life Financial

ownership-breakdown
TSX:SLF Ownership Breakdown April 17th 2022

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

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in Sun Life Financial. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Sun Life Financial's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
TSX:SLF Earnings and Revenue Growth April 17th 2022

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Sun Life Financial is not owned by hedge funds. Our data shows that RBC Global Asset Management Inc. is the largest shareholder with 3.7% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 3.3% and 3.3%, of the shares outstanding, respectively.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Sun Life Financial

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our data suggests that insiders own under 1% of Sun Life Financial Inc. in their own names. 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$9.4m worth of shares (at current prices). In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

With a 47% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Sun Life Financial. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

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. Case in point: We've spotted 1 warning sign for Sun Life Financial you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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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