The Motley Fool

Recession Investors: 4 Classically Safe Canadian Financials

office buildings
Image source: Getty Images

Investors looking to pack a long-range portfolio, a TFSA, RRSP, or RRIF need to be sure that what they’re holding is stable enough to withstand a serious downturn. Below you will find four of the best financial stocks on the TSX index to buy and hold through a recession.

Toronto-Dominion Bank (TSX:TD)(NYSE:TD)

Attractively valued and with a flawless balance sheet, TD Bank has to be one of the top stocks on the TSX index bar none. TD Bank returned 46.6% over the last five years and trades at a 35% discount against its future cash flow value. A dividend yield of 3.92% is on offer, and while a 9.6% expected annual growth in earnings is not significantly high, it’s not bad for a Bay Street banker at the moment.

However, this banker’s valuation is only straightforward if an investor isn’t too picky: though a P/E of 12.5 times earnings beats the market, it’s above the Canadian banking average of 10.4. Meanwhile, a P/B of 1.8 times book is above the Canadian banking average of 1.4, as well as the market’s 1.6. Aside from this, a flawless balance sheet makes for a solidly low-risk, long-range play.

Manulife Financial (TSX:MFC)

With returns of 8% in the last 30 days, TSX index insurance star Manulife Financial is outperforming both the market and the industry. Its one-year past earnings growth rate of 138.1% is impressively high, while a P/E of 9.7 times earnings Manulife Financial beats both the market and (fractionally) the Canadian insurance industry, while its P/B of 1.1 times book matches the industry exactly. A dividend yield of 4.42% pairs well with an 11.2% expected annual growth in earnings, and a future ROE of 12%.

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

Near-identical one- and five-year past earnings growth rates of 10.3% and 10.9% speak to a stock that rolls about as steady as they come. Attractively valued with a P/E of 10 times earnings and P/B of 1.5 times book, CIBC pays a tasty dividend yield of 4.96%, and is expecting a 6.6% expected annual growth in earnings and three-year ROE of 15.4%.

Canadian Imperial Bank of Commerce insiders have only sold shares during the last three months for a significant sum, although not in great numbers. Aside from this, CIBC, like the other three stocks listed here today, is as close as it comes to a perfect, low-risk stock to buy and hold long-term for stable passive income.

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

Scotiabank’s one-year past earnings growth remained static with neither an increase nor a reduction, though its five-year average past earnings growth has been positive, if not overwhelming, at 5.3%. Its P/E of 10.8 times earnings and P/B of 1.4 times book are in line with other Big Sixers, while a dividend yield of 4.76% and 6.6% expected annual growth in earnings are also par for the course.

The bottom line

2019 is by no means looking the same as 2018 (its last quarter notwithstanding). From a 35% discount against future cash flow value to a stable dividend yield of 3.94%, TD Bank is a prime example of the kind of stock a retirement investor should leave well alone in their RRSP, RRIF, or other retirement investment plan in the face of increased turbulence on the TSX index.

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. Bank of Nova Scotia is a recommendation of Stock Advisor Canada.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.