MENU

Consider The Bank of Nova Scotia and Manulife Financial Corp. for Consistent Long-Term Returns

Despite market and sector challenges I believe the following two companies will provide consistent future returns to conservative income investors.

1. The Bank of Nova Scotia

I hold stocks in several Canadian banks because I believe they are among the most fundamentally sound in the world. The 2008 financial crisis proved this to me. That’s why I believe serious income investors should consider The Bank of Nova Scotia (TSX: BNS)(NYSE: BNS) and other major Canadian banks.

The Bank of Nova Scotia operates in more than 55 countries and has more than 21 million customers. This gives it geographic diversity. A particular big downturn in one nation’s economy won’t hurt the bank’s overall earning and profits, as the other markets are a hedge against this. As at April 30, 2014, The Bank of Nova Scotia had assets of $792 billion.

Two reasons I suggest The Bank of Nova Scotia as a worthy stock are its four diversified growth operations and its dividend payments. Its Canadian Banking division was responsible for 33% of Q2 2014 net income. Its International Banking was responsible for 24%, Global Banking & Markets was responsible for 23%, and Global Wealth & Insurance was responsible for 20%. This to me is a significant representation of diversity of operations, not relying solely on one division, and with good percentages spread out across these four platforms.

The Bank of Nova Scotia’s dividend yield is 3.50% and its five-year average dividend yield is 3.80%. Its dividend rate is $2.56.

2. Manulife Financial Corp.

I’m personally considering buying Manulife Financial Corp. (TSX: MFC) (NYSE: MFC) for two major reasons. First it operates globally, and is therefore diversified across its operations. The company’s main operations are in Canada, the U.S., and Asia and Manulife is one of the largest life insurance companies worldwide.

A growing portion of its revenues comes from its Asian operations. The company is one of the world’s leading financial services groups with a pan-Asia presence. Manulife has been doing business in Asia since 1897.

Second, to have a life insurance component to my portfolio, I only consider dividend payers. Manulife did cut its dividend during the financial crisis, However, John Stephenson, former manager of the First Asset Canadian Dividend Opportunity Fund, believes Manulife may begin increasing its dividends sometime in the next few quarters. He recently said to the Globe and Mail, “The environment is working much better for them.”

Manulife Financial’s earnings have increased along with rising stock markets. For example, the company’s Q1 2014 Asia Division insurance sales were US$258 million. This represents an increase of 23% versus Q1 2013.

Manulife Financial’s dividend yield is 2.40% and its five-year average dividend yield is 3.40%. Its dividend rate is $0.52. Manulife will release its Q2 2014 financial results on Thursday, August 7, 2014.

Consider these two stocks as additions to your portfolio as each company has the fundamental strengths to drive growth.

Another stock to bank on

Constructing a portfolio is like building a house, chief analyst Iain Butler says. You want to build it on a foundation of "rock solid, proven, long-term money makers." And do we have a winner for you... click here now for our FREE report and discover 1 top Canadian stock for 2014 and beyond!

Fool contributor Michael Ugulini owns shares of The Bank of Nova Scotia.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.