The Canadian financial sector has always been a top pick for investors looking for stability, but 2025 could be an especially interesting year. Lower interest rates and improving economic conditions could give financial stocks an extra boost, making them attractive to buy now and hold for the long term.
In this article, I’ll highlight three fundamentally strong financial stocks Canadian investors can consider in 2025.
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Fairfax Financial stock
The first stock on my list of top financial sector stocks is Fairfax Financial (TSX:FFH), a powerhouse in the property and casualty insurance space. Headquartered in Toronto, it has built a reputation for smart investments and disciplined underwriting.
As of now, FFH stock is trading at $1,976.47 per share, with a market cap of $45.3 billion. The stock has seen an impressive surge, climbing over 44% in the past year and a whopping 224% in the last three years. On top of that, investors can benefit from its annual dividend yield of about 1.1%.
With its book value per share up by nearly 12% in the first three quarters of 2024, Fairfax’s financials continue to show strength, backed by a well-managed insurance business. This growth also reflects the company’s ability to deliver solid growth even in uncertain times, with the help of rising premiums and strategic acquisitions like Gulf Insurance.
Manulife stock
Another strong name on my list is Manulife Financial (TSX:MFC), a top multinational firm in the life and health insurance space. This financial giant currently has a market cap of $75.3 billion as its stock trades at $43.46 after climbing by an impressive 48% over the last year. MFC’s investors are also rewarded with a quarterly dividend payout, offering a 3.7% annualized yield.
In the third quarter of 2024, Manulife posted a 4% YoY (year-over-year) rise in its core earnings to a record $1.8 billion, along with a 40% YoY surge in annualized premium equivalent sales, reflecting robust demand for its insurance products.
Overall, the company’s solid 137% life insurance capital adequacy test ratio highlights its rock-solid balance sheet, giving it plenty of room to expand. With an expanding presence in Asia and stable income from wealth and asset management, Manulife continues to be a top stock for long-term investors.
TD Bank stock
Toronto-Dominion Bank (TSX:TD) could be another strong name on my list, especially if we consider the prospects of its recovery in 2025. After declining by nearly 4% in the last four months, TD stock currently trades at $82.54 per share, with a market capitalization of $144.8 billion.
One of the biggest factors that weighed on TD’s performance last year was concerns regarding its U.S. anti-money laundering (AML) probe, which raised investor uncertainty and drove its stock lower. However, despite these headwinds, the bank continues to reward investors with a 5.1% annualized dividend yield.
Despite recent challenges, TD’s core banking business remains strong. In the fourth quarter of its fiscal year 2024 (ended in October), the bank reported record revenue of $5.06 billion in its Canadian personal and commercial banking segment, reflecting a 7% YoY surge due mainly to strong loan and deposit volume growth and margin expansion on deposits.
Moreover, TD Bank is currently undergoing a leadership transition, which is expected to bring fresh strategic direction, especially as it continues with its AML remediation efforts and refines its long-term growth strategy. These positive factors may help TD stock soar in 2025 and beyond.
