If you’re a Canadian investor who’s mostly in TSX stocks, odds are you have more than your fair share of financial plays. Indeed, the Canadian stock market is quite heavy on the financial sector. And though that could lead to periods of underperformance as tech stars soar while banks and insurers yield relatively mild results, I still think that there’s way more value to be had in the financial scene today, especially on this side of the border.
Indeed, the Canadian banks seem to be waking up in a big way after hibernating for a number of years. Further, some insurance firms are also starting to heat up in an environment that may continue to act in their favour.
Undoubtedly, Canada’s financials are not only intriguing ways to make up for lost time as the Canadian economy rolls higher, but they’re also pretty bountiful ways to give yourself a bit of a passive-income boost.
Despite the Bank of Canada’s rate cuts (and more to come), Canadian financial stocks still yield an impressive amount. And if being paid cash for patiently sounds like a good deal to you, I believe the following Canadian financial stocks are worth picking up (or at least adding to a watchlist) before the month of November draws to a close.
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TD Bank
TD Bank (TSX:TD) stock has been beaten down amid money-laundering pressures. However, I find that the debacle will quickly become old news, especially as TD Bank looks to get back to growing its earnings and topping estimates. Undoubtedly, a new chief executive officer and anti-money laundering chief are on the job. And as the bank looks to become one of the best at preventing future incidents, I think regulators will take notice.
However, whether they’ll react positively by easing or lifting restrictions at some point over the next few years remains the big question. Perhaps the length that TD will be stuck in the U.S. regulatory penalty box is overestimated by investors and analysts right now. I suppose only time will tell.
Either way, TD stock now sports one of the higher yields of the Canadian banks, currently at 5.2%. If you seek value and a comeback story, I think it’s tough to look past the name while it’s closer to its 52-week lows than highs.
Great-West Lifeco
Great-West Lifeco (TSX:GWO) is an insurer that’s making new all-time highs. Going into the new year, I think even higher highs could be ahead as U.S. profitability continues to act as a strong point. Though the stock’s impressive two-year run (up 56%) makes shares less of a bargain today, I still think they’re worth picking up if you seek the perfect mix of capital gains and income.
The stock still yields a handsome amount (4.46%), but the biggest reasons to pursue the name, I believe, are the impressive profitability and the depressed 12.91 times trailing price-to-earnings (P/E) multiple. Indeed, momentum, high yields, and dirt-cheap multiples seldom come together.
Sure, Great-West may be a more underrated Canadian financial, but at this pace, I view it as one of the sector’s stars and one that should be given the respect it deserves. While I expect a pullback to happen at some point next year, I’m not against buying a half position here if you’re afraid the yield will fall further as a result of a continuation of the recent rally.
