Investors often hold financial stocks as anchor positions in their RRSP portfolios. Aside from the banks, there are some interesting choices for Canadian investors in the sector.
Sun Life Financial
Sun Life (TSX:SLF)(NYSE:SLF) is mostly known as a Canadian insurance company, but the business is much more extensive than many people might realize. Operations are located in Canada, the United States, the U.K, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China, Australia, Singapore, Vietnam, Malaysia, and Bermuda.
The Canadian business provides insurance and wealth management products and solutions. The U.S. business is a leader in group benefits plans. On the asset management side, Sun Life’s Boston-based MFS is an investment management firm with US$662 billion in assets under management.
Asia is the growth story for the future where a rising middle class in countries with significant populations offers attractive insurance and wealth management opportunities. Sun Life reported net income of $143 million in Q2 2021 from the Asia group, which is up $17 million, or 13% compared to the same period last year. Insurance sales rose 35% and wealth sales increased 64%.
Across the company net income came in at $900 million in Q2, up 73% compared to Q2 2020. Return on equity was a solid 16.3% and the business has a strong balance sheet with $3.2 billion in cash and liquid assets as of June 30, 2021.
Sun Life pays a quarterly dividend of $0.55 per share. The Q2 payout ratio was 37%, so there is ample room for increases. At the time of writing the stock trades near $65 per share and provides a 3.4% dividend yield.
Looking ahead, interest rates are expected to move higher in the back half of 2022 and continue to increase in the coming years. Higher interest rates tend to be a net positive for Sun Life as they boost the return the company can get on funds that are held to cover potential insurance claims.
This is a good stock to buy if you want exposure to emerging market growth through a top Canadian company.
Power Corp (TSX:POW) is a Canadian holding company with subsidiaries primarily focused on insurance and traditional wealth management activities. In addition, Power Corp invests in disruptor start-ups, including a majority interest in Wealthsimple and a large position in Lion Electric, a Canadian manufacturer of electric school buses and other commercial vehicles.
Publicly traded firms such as Great-West Lifeco and IGM Financial are part of the Canadian portfolio. These companies are home to firms such as Canada Life, IG Wealth Management, Investment Planning Counsel, and Mackenzie Investments, among others. Power Corp also has positions in many of Europe’s top international companies through another holding company partnership.
The stock looks cheap when you add up the values of the subsidiaries and provides an attractive dividend that should continue to grow. At the time of writing Power Corp trades for $43.50 per share and offers a 4% dividend yield.
The bottom line
Sun Life and Power Corp are top-quality Canadian financial companies that give investors exposure to a broad range of businesses and markets. If you are searching for non-bank financial stocks for your RRSP, these names deserve to be on your radar.