4 Key Canadian Financial Stocks You Could Be Missing Out On

Are Canadian investors focusing too much on the upper tier of Bay Street bankers, leaving stocks like E-L Financial (TSX:ELF) by the wayside?

| More on:

Looking for a way to make your portfolio more defensive? Arguably one of the best ways to secure a portfolio is to gain exposure to stable financials stocks. If you’ve eschewed the Big Six so far and want to pack some sturdy financial tickers, the following mix of bankers, insurers, and financial service providers make up some of the best defensive dividend payers on the TSX index.

National Bank of Canada (TSX:NA)

Up 0.93% in the last five days, the banker that makes the Big Six the Big Six (it’s sometimes excluded, leaving the Big Five) saw one-year past earnings growth of 10.1% that beat the Canadian banking industry average of 8.9% for the same period. National Bank of Canada’s five-year average past earnings growth shook out at 7.5%, just missing the industry status quo of 7.9% for the half-decade.

With more inside buying than selling of National Bank of Canada shares in the last three months, it’s a strong buy at the moment, with decent valuation and passive income to boot, though its outlook in earnings over the next one to three years could be higher. Highlights of this stock’s data include a P/E of 10.3 times earnings and dividend yield of 4.19%.

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM)

Using this Big Six ticker as a benchmark, we can see right away through CIBC’s P/E of 9.6 times earnings and P/B of 1.5 times book that it can compete with the TSX index on value. With a healthy balance sheet and some inside buying in the last three months, it’s certainly a solid choice.

It’s got a nice sized dividend yield for a TSX banker, coming in at 4.86%. While its outlook could be better, a 4% expected annual growth in earnings isn’t too far off the industry average, and it’s back up with a decent track record: witness a one-year past earnings growth rate of 11.4% following on from a five-year average rate of 10.8%.

E-L Financial (TSX:ELF)

Switching it up from bankers to insurers, let’s start by looking into this popular TSX index financial services stock. Up 3.34% in the last five days at the time of writing, E-L Financial has seen more inside buying than selling of its shares. It’s undervalued with a P/E of 6.3 times earnings and P/B of 0.6 times book and pays a dividend yield of 0.62%, backed up with a 9.8% expected annual growth in earnings.

Industrial Alliance Insurance and Financial Services (TSX:IAG)

Undervaluation mixed with passive income and some projected growth make this popular insurer one of the best non-Big Six stocks on the TSX index. A P/E of 7.9 times earnings and P/B of 0.9 times book show just what good value for money investors would be getting if they bought at today’s prices, while a dividend yield of 3.82% gives a further incentive to do so. A considerable amount of inside buying in the last three months indicates that insider confidence in Industrial Alliance Insurance and Financial Services is high.

The bottom line

E-L Financial’s one-year past earnings growth of 3.1% isn’t too dissimilar from Industrial Alliance Insurance and Financial Services growth rate of 10.6% for the same period. Indeed, high growth is not the domain of financial stocks on the TSX index. However, for a mix of dividends and heathy balance sheets, the above tickers are strong choices if you’re shopping for dividend stocks in a defensive sector.

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.

More on Dividend Stocks

Canada national flag waving in wind on clear day
Dividend Stocks

3 TFSA Red Flags Every Canadian Investor Should Know

Day trading in a TFSA is a red flag. Hold index funds like the Vanguard S&P 500 Index Fund (TSX:VFV)…

Read more »

Paper Canadian currency of various denominations
Dividend Stocks

1 Magnificent Canadian Stock Down 15% to Buy and Hold Forever

Magna stock has had a rough few years, but with shares down 15% in the last year (though it's recently…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

Earn Steady Monthly Income With These 2 Rock-Solid Dividend Stocks

Despite looming economic and geopolitical uncertainties, these two Canadian monthly dividend stocks could help you generate reliable income in 2025…

Read more »

A worker gives a business presentation.
Dividend Stocks

2024’s Top Canadian Dividend Stocks to Hold Into 2025

These top Canadian dividend stocks are worth holding into 2025 to generate steady and growing passive income.

Read more »

A train passes Morant's curve in Banff National Park in the Canadian Rockies.
Dividend Stocks

1 Magnificent Canadian Stock Down 12% to Buy and Hold Forever

This top stock may be down 12% right now, but don't see that as a problem. See it as a…

Read more »

Confused person shrugging
Dividend Stocks

Passive Income: How Much Do You Need to Invest to Make $625 Per Month?

This retirement passive-income stock proves why investors need to always take into consideration not just dividends but returns as well.

Read more »

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

Secure Your Future: 3 Safe Canadian Dividend Stocks to Anchor Your Portfolio Long Term

Here are three of the safest Canadian dividend stocks you can consider adding to your portfolio right now to secure…

Read more »

money goes up and down in balance
Dividend Stocks

Is Fiera Capital Stock a Buy for its 8.6% Dividend Yield?

Down almost 40% from all-time highs, Fiera Capital stock offers you a tasty dividend yield right now. Is the TSX…

Read more »