MENU

2 Great Insurance Stocks to Buy for Dividend Growth

Investing in dividend-growth stocks is one of the most powerful methods to build wealth over the long term. With this in mind, let’s take a look at two high-quality insurance stocks with dividend yields up to 3.5% and active streaks of annual increases, so you can determine which would fit best in your portfolio today.

Industial Alliance Insurance and Financial Services Inc.

Industrial Alliance Insur. & Fin. Ser. (TSX:IAG) is one of Canada’s leading providers of financial products and services, including life and health insurance, auto and home insurance, mortgages and car loans, and savings and retirement plans.

Industrial Alliance currently pays a quarterly dividend of $0.35 per share, equal to $1.40 per share on an annualized basis, which gives it a yield of about 2.8% at today’s levels.

A 2.8% yield may not peak your interest at first, but what we care about more is dividend growth, and Industrial Alliance has shown a dedication to delivering just that. It has raised its annual dividend payment each of the last three years, and its 9.4% hike in February has it positioned for 2017 to mark the fourth consecutive year with an increase.

I think Industrial Alliance will continue to grow its dividend in 2018 and beyond as well. It has a target dividend-payout range of 25-35% of its net income attributable to common shareholders, so I think its ongoing double-digit percentage growth, including its 47.4% year-over-year increase to $537.2 million in 2016, and its 12.2% year-over-year increase to $110.3 million in the first quarter of 2017, and its continued growth of assets under management and administration that will help drive future earnings growth, including its 10.6% year-over-year increase to $130.18 billion in the first quarter of 2017, will allow its streak of annual dividend increases to continue into the 2020s.

Manulife Financial Corp.  

Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) is one of the world’s largest financial services groups, operating as John Hancock in the United States and Manulife elsewhere. It provides financial advice, insurance products, and wealth and asset management solutions to over 22 million clients in Canada, the U.S., and around the world.

Manulife currently pays a quarterly dividend of $0.205 per share, representing $0.82 per share on an annualized basis, and this gives its stock a yield of about 3.5% today.

Like Industrial Alliance, Manulife has shown a strong dedication to growing its dividend. It has raised its annual dividend payment for three consecutive years, and its 10.8% hike in February has it set up for 2017 to mark the fourth consecutive year with an increase.

I think Manulife is the industry’s top pick for dividend growth going forward. I think its very strong financial performance, including its 34.7% year-over-year increase in common shareholders’ net income to $2.8 billion in 2016, and its 28.8% year-over-year increase to $1.31 billion in the first quarter of 2017, and its ongoing growth of assets under management and administration that will fuel future net income growth, including its 11.2% year-over-year increase to a record $1.01 trillion in the first quarter of 2017, will allow its streak of annual dividend increases to continue for the foreseeable future.

Which of these top insurance stocks belongs in your portfolio?

I think Industrial Alliance and Manulife are two of the best investment options for dividend-growth investors in the insurance industry. All Foolish investors should take a closer look at each and strongly consider initiating a position in one of them today.

1 Massive Dividend Stock to Buy Today (7.8% Yield!) - The Dividend Giveaway

The Motley Fool Canada's top dividend expert and lead adviser of Dividend Investor Canada, Bryan White, recently released a premium "buy report" on a dividend giant he thinks everyone should own. Not only that - but he's created a must-have, exclusive report that outlines all the alarming traits of dividend stocks that are about to blow up - and how you can avoid them.

For this limited time only, we're not only taking 57% off Dividend Investor Canada, but we're offering you special access to two brand-new reports, free of charge upon signing up. They will outline everything you need to know so you steer clear of dividend burn-outs AND take advantage of the dividend giants in the Canadian market.

While this offer is still available, you can find out how to get a copy of these brand-new reports by simply clicking here.

Fool contributor Joseph Solitro has no position in any stocks mentioned.

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.