Are These Canada’s 4 Best Financial Dividend Stocks?

Investors looking for defensive dividends should consider Power Corporation of Canada (TSX:POW) and two other big name financials.

| More on:
Man considering whether to sell or buy

Image source: Getty Images.

While dividend income isn’t immune from a widespread economic downturn, the following three financial stocks represent some of the best places investors can hide ahead of a potential recession. An outperforming trio of A-list dividend payers, these financials are among the most secure passive income stocks to be found on the TSX Index.

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS)

One of the best of the Big Six and certainly one of the keystones of the TSX index, Scotiabank is up 0.68% in the last five days and has seen some inside buying in the last three months. A one-year past earnings growth of 6.2% and five-year average growth of 5.5% puts this banking stock with a flawless balance sheet ahead of the curve.

Valuation is still spot-on, with a P/E of 10.8 times earnings and market-weight a P/B of 1.5 times book. Passive income fans looking for a positive outlook should be pleased to see a dividend yield of 4.56% on offer backed up with a 6.4% expected annual growth in earnings.

Power Corporation of Canada (TSX:POW)

Another TSX index A-lister, Power Corporation of Canada offers a dividend yield of 5.69%, and is matched with a 29% expected annual growth in earnings. It’s attractively undervalued, with a P/E of 9.9 times earnings and P/B of 0.9 times book – which shows that a financial stock can trade below its book price. With a positive five-year average past earnings growth of 5.6%, it’s one of the best all-rounder financials outside the Big Six.

Sun Life Financial (TSX:SLF)(NYSE:SLF)

In the last three months, more shares in Sun Life Financial have been bought through insider trading than sold, which just goes to show that investors in the know are bullish on this TSX index super-stock. It’s trading at an attractive price right now, and is down 1.57% in the last five days, presenting a slight value opportunity.

A five-year average past earnings growth of 8.5% is in line with the financials sector, while its dividend yield of 4.31% is a little higher than average; this is matched with a 12.8% expected annual growth in earnings. Sun Life Financial is a healthy ticker, with a debt level of 19.2% of net worth. Meanwhile, good value for money is signaled by a P/E of 13.1 times earnings and P/B of 1.3 times book.

Great-West Lifeco (TSX:GWO)

The final TSX index financial stock on today’s list, Great-West Lifeco enjoyed a one-year earnings growth of 37.8%, thereby crushing the insurance industry average for the same period. Its dividend yield of 5.3% is made all the more appetizing by a 3.9% expected annual growth in earnings.

An acceptable level of debt at 25.2% of net worth comes in below the danger threshold and qualifies this stock for membership of the healthy balance sheet club. Attractive valuation is quantified by a P/E of 9.8 times earnings and P/B of 1.3 times book, both of which are below market weight.

The bottom line

An undervalued Great-West Lifeco would make a good combination with Scotiabank if the financials section of your portfolio is a little light, but you want to avoid being overexposed to any single industry. Meanwhile, Sun Life Financial and Power Corporation of Canada offer some defensive dividends if you want a solid financial stock outside of the Big Six banks.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. Scotiabank is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »