Editor’s Note: Please see our latest analysis of Toronto-Dominion Bank, Potash Corp., and Suncor Energy in the Portfolio Update following the article below.

Every trade deal has winners and losers–along with the usual swarm of lobbyists and activists hoping to be among the former instead of the latter.

As investors, we don’t have a seat at the bargaining table, unless one of our companies has a skilled lobbyist who has the ear of negotiators.

Otherwise, we’re essentially sidelined, while our ruling class and the jetsetters of the global elite swan around in luxury hotels on our tab deciding which industries will be favored by the future flow of capital.

That means the deals that get struck can sometimes sting our favorite companies. At the same time, trade pacts can also create new growth opportunities.

After six years of discussions and 19 formal rounds of negotiations, 12 countries from around the Pacific Rim, including Canada, finally came to an agreement this week on the Trans-Pacific Partnership (TPP). The broad aim of the TPP is to ease trade by slashing tariffs and establishing a framework for brokering disputes.

From Canada’s perspective, the biggest winner is likely to be the financial services sector, particularly insurers. That’s because insurance has relatively low market penetration in a number of countries in the developing world.

But demand for coverage is rapidly rising among the burgeoning middle class in these countries, including TPP signatories Malaysia and Vietnam. And these fast-growing markets will now be more open to Canadian insurers, such as Manulife Financial Corp. (TSX: MFC, NYSE: MFC) and Sun Life Financial Inc. (TSX: SLF, NYSE: SLF), than they were previously.

In addition to providing greater access to these markets, the TPP also will help Canadian insurers compete on a level playing field against domestic state-owned enterprises. At least, that’s the hope.

But even without the TPP, both Manulife and Sun Life have strong growth trajectories ahead, despite near-term revenue challenges.

Analysts forecast Manulife’s adjusted earnings per share will grow 18% year over year, to CAD2.06, in 2016 and a further 10% in 2017, to CAD2.26.

Naturally, earnings growth will flow through to the dividend, which is projected to rise another 23.5% over the next two years, to CAD$0.84 annualized.

Consequently, Manulife boasts overwhelmingly bullish sentiment from analysts, at 18 “buys,” two “holds,” and one “sell.” The consensus target price is CAD26.27, which suggests potential appreciation of 21.5% above the current share price.

Manulife already has a long history in Asia, dating back to 1897. And its Asia segment accounted for nearly 22% of revenue last year, while net premiums earned from the region were 40.7% of the firm’s total. That’s a strong foothold that should facilitate further expansion there.

With a forward yield of 3.2%, Manulife is a buy below USD18/CAD23.

Similarly, Sun Life’s earnings per share are expected to grow 8% year over year, to CAD3.88, in 2016 and another 11%, to CAD4.32, the following year.

And its dividend is forecast to climb 17.1%, to CAD1.78, over the next two years.

Sun Life also enjoys bullish sentiment on Bay Street, at 13 “buys,” five “holds,” and one “sell.”

But the stock has been steadier than Manulife this year and, therefore, trades closer to fair value. The consensus 12-month target price is CAD48.14, which suggests potential appreciation of 7.8% above the current share price.

Sun Life has a smaller presence in Asia than Manulife. Its Asia segment accounted for just 7.2% of revenue last year and 9.7% of profits. But that also means it has more room to grow in the region.

With a forward yield of 3.4%, Sun Life is a buy below USD33/CAD43.

Although the terms of the TPP have been finalized, the pact still has to be ratified by each member nation’s legislature, a process that could take as long as two years. No doubt these insurers are thinking, “Faster, please!”

The Dividend Champions: Portfolio Update

By Deon Vernooy

Toronto-Dominion Bank (TSX: TD, NYSE: TD) announced it’s closed a deal to acquire a USD2.2 billion credit card portfolio from the high-end general retailer, Nordstrom. In addition, the two entities have agreed that TD will become the exclusive issuer of Visa and private-label credit cards for Nordstrom.

The transaction will add a relatively minor 0.5% to TD’s total loan book and 10% to its credit card portfolio.

But it does help the bank expand its U.S. business by adding about 2% to the U.S. loan book. TD previously expanded its U.S. credit card business with the acquisition of a USD5.9 billion credit card portfolio from Target Corporation in 2012.

The bank remains a core holding in our Dividend Champions Portfolio. With an attractive dividend yield of almost 4% and a reasonable price-to-earnings ratio of 11, TD is a buy below USD47/CAD61.

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Potash Corporation of Saskatchewan (TSX: POT, NYSE: POT) announced it has withdrawn its indicative offer to acquire K+S Aktiengesellschaft, the German potash producer. That removes at least one of our concerns about the company.

The private proposal to acquire K+S for EUR41 per share, valuing the company at EUR7.8 billion, was floated back in May.

The stated motivation for the deal was that a combined entity would create a stronger and more geographically diversified business. But clearly the almost complete $4.1 billion Legacy potash mine, also based in Saskatchewan, would have been a prized asset.

Potash Corp. now yields nearly 7%, which we believe is sustainable even in a lower potash price environment for these reasons:

Free cash flow is expected to ramp up considerably over the next few years, as the heavy capital expenditure program of $2 billion per year comes to an end and new facilities come on line in 2016 and 2017. Capital expenditure requirements have already declined to around $1.1 billion in 2014 and 2015, with further sharp declines expected in 2016 and 2017. Operating cash flow remains sound, and with lower capital requirements it should be able to comfortably cover the dividend.

Cash operating costs for potash production are currently at $83 per ton (the spot price is around $300/ton) and is expected to drop further as new low-cost production facilities at Rocanville and New Brunswick come into full production in 2016 and 2017.

The balance sheet remains in good shape, with a debt-to-capital ratio of 29%.

Potash Corp. operates some of the lowest-cost potash production facilities in the world and is in a strong position to protect its position even with lower potash prices.

During the firm’s second-quarter earnings release, management seemed rather optimistic about global potash demand, especially with regard to China and India. Profit guidance and volume indications for the year were also confirmed, with only minor changes as recently as late July.

With the K+S transaction off the table, and with the share price down sharply over the past month, we are comfortable buying Potash Corp. below USD27/CAD35.

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Dividend Champion Suncor Energy Inc. (TSX: SU, NYSE: SU) has offered to acquire Canadian Oil Sands Ltd. (TSX: COS, OTC: COSWF) for CAD4.3 billion (USD3.3 billion), a 43% premium over last Friday’s closing price.

Including the company’s estimated outstanding net debt of CAD2.4 billion as of June 30, the total transaction value would be CAD6.6 billion. This compares to the current relatively large CAD60 billion enterprise value of Suncor.

The offer suggests an exchange of 0.25 Suncor shares for every Canadian Oil Sands share, which obviously makes sense from Suncor’s perspective given the relative strength of its share price compared to its target.

Over the past five years, however, this ratio averaged around 0.6, which indicates that Suncor may have to improve its offer or include some cash to sweeten the deal.

Indeed, the bid has quickly become contentious, with Canadian Oil Sands’ management implicitly rejecting the offer by adopting a so-called poison pill provision. In response, Suncor says it plans to bypass the board and take its offer directly to shareholders. Meanwhile, Canadian Oil Sands’ effort to spurn Suncor has prompted speculation that another deep-pocketed suitor, such as Exxon, could enter the fray with a rival bid.

Canadian Oil Sands’ sole operating asset is its majority interest (36.7%) in the Syncrude project in which Suncor and Imperial Oil are also stakeholders. Syncrude currently produces around 275,000 barrels of crude oil equivalent per day of which almost half would accrue to Suncor should the deal be consummated. This would add around 20% to Suncor’s estimated 2015 production.

Suncor has a solid balance sheet (25% debt-to-capital ratio), strong cash flow, and around $5 billion in cash, putting it in an excellent position to acquire top assets on the cheap while energy markets remain depressed.

In response to the weaker oil price environment, the company has already pared its capital expenditure plans, reduced operating costs, and cut back on its share repurchase program. This provides some comfort that the dividend should remain safe even if oil prices stay lower for longer. Suncor is a buy below USD27/CAD36.