Financial stocks have been a go-to preference for investors who want to play it safe in the market yet receive a sizeable return. Investing in financial stocks is also a superb way to diversify your portfolio.
As part of a well-diversified portfolio, financials stocks are a must. And in this context, I think Manulife Financial (TSX: MFC)(NYSE: MFC) and Toronto-Dominion Bank (TSX: TD)(NYSE: TD) are two top picks to consider right now.
Here’s why.
TD Bank
One of Canada’s largest banks, TD is a powerhouse of a financials stock to own today. Indeed, this stock continues to make my list of top picks due to the lender’s long-term track record of providing meaningful total returns for investors.
Between TD’s dividend yield of 3.6% and the bank’s long-term capital appreciation record, investors have been able to amass some serious wealth over recent decades owning this gem. I don’t see things changing on the horizon in this front.
TD’s recent earnings have highlighted this performance. In fact, TD’s results surpassed analyst expectations by a wide margin. The company’s Q1 adjusted income of US$3.38 billion came in higher year over year, as the effects of the pandemic wind down. Indeed, for those who view greener pastures ahead, this is a great pick right now.
The company’s also been streamlining its operations of late. Via cutting out unprofitable branches and leveraging technology to do so, TD hopes to provide long-term investors with boosted returns. These moves ought to pay dividends (figuratively and literally) over the long haul. Accordingly, I think TD’s CAGR of 15% over the long term is likely to remain in place for some time.
Manulife
An undervalued financials stock, Manulife certainly looks cheap at these levels.
This large-cap insurer continues to churn out great results as well as a relatively juicy dividend yield of 4.5% for investors.
The company was quick to recover from the pandemic-induced turmoil we saw last year. Indeed, Manulife’s exposure to Asian markets and its global growth profile in general, make it a much more geographically diversified and defensive option than its peers right now.
I think investors seeking growth at a reasonable price ought to consider companies like Manulife right now. Indeed, Manulife trades at a discount from a valuation perspective to the big banks. Those seeking value today have a few great options. Manulife and TD both offer great risk/reward potential for such long-term investors. Indeed, these two stocks ought to remain atop the watch lists of investors seeking diversification today.
