Canadian stocks witnessed a healthy recovery in November 2023 after declining for three months in a row, as cooler-than-expected consumer inflation numbers strengthened the possibility that the Bank of Canada and the Federal Reserve might soon start easing their monetary stance. This is one of the primary reasons why the main TSX index has advanced more than 6% this month so far.
But is now the right time to make big bets on volatile growth stocks, or should you continue sticking to trustworthy dividend stocks? Let’s discuss.
How investing in financial stocks can help
Although the stock market has seen a sharp recovery of late, this rally doesn’t necessarily imply that all macroeconomic uncertainties haunting investors for a long time have suddenly disappeared. The ongoing geopolitical tensions, labour issues, and other post-pandemic global economic growth challenges may continue to keep investors on their toes in the near future.
During such uncertain economic phases, in my opinion, investors must hold some reliable dividend-paying stocks in their portfolios, especially from the financial sector. In general, financial stocks are shares of companies that simply deal with money, like banks and insurance firms. Over time, these stocks can offer handsome returns, making them less about quick wins and more about steady growth in the long run.
Now, let me quickly highlight a top financial stock I find really attractive to buy on the TSX today.
A top financial stock to buy on the TSX today
If you want to see your hard-earned money grow steadily over the long term, Sun Life Financial (TSX: SLF) stock could be worth considering on the TSX today. If you don’t know it already, it’s a Toronto-headquartered firm that offers a variety of financial services, including asset and wealth management, insurance, and health solutions, to its clients. The company currently has a market cap of about $40 billion as its stock trades at $68.55 per share after rising more than 9% so far in 2023. SLF stock has a decent 4.6% annualized dividend yield at this market price and distributes its dividend payouts every quarter.
Besides its reliable dividends, the three other main factors that make Sun Life my favourite TSX stock pick from the financial sector are its strong long-term earnings growth trends, years-long track record of yielding positive returns for its loyal investors, and stable financial outlook.
Notably, in five years from 2017 to 2022, Sun Life Financial’s adjusted earnings rose 51%, despite facing COVID-19-related operational challenges in between, reflecting the underlying strength of its robust business model. During the same five years, the company also raised its annual dividends by 58%, which reflects its commitment to returning a part of the earnings to investors.
Even as macroeconomic uncertainties have badly affected the growth of most financial institutions of late, Sun Life’s earnings in the first three quarters of 2023 have still grown positively on a year-over-year basis with the help of continued volume gains in its wealth and asset management segment. You can expect SLF’s earnings growth trends to improve further, as economic uncertainties gradually subside in the future, which should help this top TSX financial stock continue soaring.
