Sun Life Financial made about $1.3-billion in 2008 and 2009 - at first blush a healthy sum by any yardstick. Unfortunately, it wasn't enough because the insurer paid $1.7-billion in common dividends over that period of time.
It's the sort of gap that can make an investor fear for their dividend. That's not entirely necessary, but there's also not a lot here to tempt a discerning investor in my view.
If the company's fortunes were improving, there would be less to worry about.
Last week, Standard & Poor's lowered Sun Life's credit ratings. They're still healthy - A at the holding company and AA- at the operating level, but the trend is not your friend.
To compound matters, the holding company is still pumping money into the U.S. subsidiary, and more than investors expected it to: $400-million recently and $1.5-billion in 2008 and 2009, according to BMO Nesbitt Burns.
The money is supposed to flow the other way. The upshot is that excess capital at the holding level, which is what gives investors confidence and encourages them to pay a higher price-to-earnings multiple for the shares, is relatively low.
So, should investors worry about that dividend? In my opinion, only if yield is crucial to their finances.
Standard & Poor's main point of contention is that although operating earnings are improving, they're likely not to reach the $1.75-billion the bond rater thinks is necessary to earn higher ratings. In fact, Sun Life's guidance range is below that target, so management might agree.
What bond raters, and investors, want to see is ample capital - the cushion that protects the business from shocks. Sun Life's isn't particularly inspiring and is not improving quickly.
An easy way to bolster capital is to lower the dividend, but no management team or board of directors ever wants to cut or reduce payments to investors. It's embarrassing and disruptive to your market value.
Of course the value of the company should be based on how much the company earns, not what the board chooses to do with those earnings. But that theory gets punched out by a gang of facts on a regular basis. When your investor base wants yield, they dump your stock when you stop giving it to them.
The irony is that cutting the dividend entirely for a year would solve the problem of the company's relatively light capital level.
Management has not hinted at touching the dividend, even though archrival Manulife Financial cut its payout last year, which should make it easier.
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That might imply management is confident in its ability to get past this tough market. Indeed, the yield is 4.5 per cent, which tells you investors in general aren't too worried.
And there are definitely signs of value. The stock is quoted at 1.1 times book value while the long-term return on equity is about 13 per cent. That means investing now should give you a profit yield (earnings per share divided by stock price) of about 11.5 per cent. That's pretty good if it works out.
If they were to cut the dividend - and that's very unlikely - the stock might be really attractive because the dividend would be back fairly quickly.
By and large though, I wouldn't get too excited about this investment. CEO Don Stewart routinely exercises his stock options and promptly sells his shares. He's always done this, it seems, and continues to do it.
There are many reasons to sell stock, and they're not all bad, but the fact that neither he nor others are doing any buying tells you this probably isn't a great deal.