Genworth Financial Inc (GNW): A Tale of Two Genworths

Trading at 0.8 times tangible book, this Genworth is more expensive on this basis than Genworth Financial Inc (NYSE:GNW). However, Genworth MI Canada trades at only five times earnings and pays a 5.3% dividend. This dividend it notably higher than most American financials giving Genworth MI Canada and edge in yield for income investors.

With foreign listed companies there are additional considerations to keep in mind. While shares of the company are as liquid as any other stock on the Toronto Stock Exchange, American listed shares have a lower volume. This should not drive away investors who are bullish on Genworth MI Canada in general, but buyers of American listed shares would be well advised to set limit orders rather than market orders. Dividends from Canada are also subject to a withholding tax that is usually 15%. However, since each individual’s tax situation is unique and I am not licensed to advise on the subject of taxes, potential investors should see their tax professional if they have tax related questions.

Discounts and dividends

Despite originating from the same company, these two Genworths offer investors two different options for generating income or playing a rebound in the mortgage market. Both stocks are trading below their tangible book values offering a value play for Genworth investors. As the housing market recovers, Genworth Financial Inc (NYSE:GNW) is likely to benefit more due to its higher exposure to the beaten down U.S. mortgage market. But Genworth MI Canada could also benefit from a stronger economy while paying a healthy dividend during the recovery. In the end, it comes down to each investor’s overall strategy. Deep value investors will likely prefer Genworth Financial while income investors would be partial to Genworth MI Canada. I am personally bullish on both and may make a decision about which one(s) to invest in over the next couple months.

The article A Tale of Two Genworths originally appeared on Fool.com and is written by Alexander MacLennan.

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