The Canadian financial sector is a powerhouse, comprising nearly a third of the stock market. If you invest in solid companies at the right valuation, you can enjoy a reliable stream of passive income and long-term growth. For those ready to invest $5,000, here are five top financial stocks that offer the potential for steady returns — and could be held forever.
Source: Getty Images
1. Royal Bank of Canada: A solid blue-chip investment
As Canada’s largest bank, Royal Bank of Canada (TSX: RY) is an unbeatable long-term investment. Its diversified business spans wealth management, personal banking, capital markets, and commercial banking. With a 10-year dividend-growth rate of 7%, it has consistently rewarded shareholders.
2. Bank of Nova Scotia: A dividend powerhouse
For those seeking value today, Bank of Nova Scotia (TSX: BNS) offers an attractive opportunity in the Canadian big banks. After a 9% pullback from its highs, the stock is close to its historical valuation. Priced at $72.23 per share at writing, Scotiabank offers a robust 5.9% dividend yield, backed by a history of at least 50 consecutive years of safe dividends.
This high yield makes Scotiabank an excellent option for those looking to generate substantial passive income while benefiting from long-term price appreciation.
3. Sun Life Financial: Reliable growth with a strong yield
Sun Life Financial (TSX: SLF) is a major player in the global life and health insurance market, managing about $1.5 trillion in assets. Over the past three years, the blue-chip stock delivered solid annualized returns of 9.5%.
At under $78 per share at writing, the stock is fairly valued, and its 4.3% dividend yield is attractive for income-focused investors. With strong management and heightened financial targets, Sun Life is poised for continued growth, making it a great stock to hold for years to come.
4. Intact Financial: A growth-oriented Dividend Aristocrat
While Intact Financial (TSX: IFC) may not have the highest dividend yield, it stands out in the property and casualty insurance sector. This Canadian Dividend Aristocrat has delivered an impressive 17.7% annualized return over the last three years.
At $277 per share at writing, Intact Financial offers a 1.9% dividend yield, which may seem modest. However, with a 9.7% dividend-growth rate over the past decade and consistent total returns, it’s an excellent pick for long-term investors focused on capital appreciation and steady income.
5. Citigroup: A U.S. bank with strong recovery potential
For investors willing to look beyond Canada, Citigroup (NYSE: C) presents an exciting opportunity. After rebounding strongly since late 2023, the stock has returned 47% in the past year and 12.4% annually over the last three years.
Currently trading with about a 13% discount to its fair value, Citigroup offers solid upside potential, plus a 2.8% dividend yield. As it’s expensive to convert Canadian dollars into U.S. dollars right now, Canadians can invest in Citigroup via the Neo Exchange under the ticker CITI to bypass foreign exchange risk.
The Foolish investor takeaway: A portfolio for passive income and growth
These five financial stocks are well-positioned to provide both income and growth over the long term. Whether you choose Canadian stalwarts like RBC and Scotiabank or venture into U.S. markets with the likes of Citigroup, these companies are equipped to generate reliable income and increase in value over time.
Investing $5,000 in these stocks could be the start of a rewarding financial journey — one that could last a lifetime.
