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%.
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.
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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.