With the Canadian stock market currently in a correction phase, now could be the ideal time to take a closer look at Canadian insurance stocks. These companies have a long-standing track record of steady growth, supported by consistent demand for their products and services. By strategically investing in the right insurance stocks, you can build a solid foundation for a financially secure future.
If I had $27,000 to invest in Canadian insurance stocks, here’s how I’d approach it to get both growth and income.
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Intact Financial
Intact Financial (TSX: IFC) is a leading international property and casualty insurance company. Known for its strong customer loyalty and specialized expertise, Intact is a defensive pick that has weathered market volatility well. About 75% of its customers are advocates, and 80% of brokers value its industry-leading capabilities.
Over the last decade, Intact has consistently outperformed its peers in terms of profitability. The stock has returned an impressive 14% annually, turning a $1,000 investment into $3,773. Intact’s solid growth is also reflected in its long-term dividend performance. Although its dividend yield sits at a modest 1.9%, the company has consistently raised dividends for over 20 years, with a 10-year growth rate of 9.7%.
At the current price of around $278 per share, analysts consider the stock fairly valued, making it a reliable choice for long-term investors seeking stability and solid returns.
Manulife Financial
Manulife (TSX: MFC), a leading player in the life and health insurance industry, has also proven to be a strong long-term investment. Over the past five years, its stock has delivered remarkable annualized returns of 24.8%, turning an initial $1,000 into $3,031. This was helped by valuation expansion as the stock started the period at super undervalued levels. Even when stretching back over the past decade, the stock has still produced an average return of 11% per year, growing an initial $1,000 investment into $2,830.
Currently trading around $39 per share, Manulife is available at a 21% discount from the analyst consensus target of over $49. This presents a potential opportunity for value-focused investors. Additionally, Manulife offers a solid dividend yield of 4.5%, with a decade-long track record of dividend increases at a growth rate of 10.9%.
The stock’s ability to generate solid returns, coupled with a steady dividend, makes it a potential good pick for investors looking for both income and growth.
How to invest: Dollar-cost average for long-term success
If you’re considering investing $27,000 in these two Canadian insurance giants, I recommend a dollar-cost averaging strategy. By investing over time, whether monthly or quarterly, you can reduce the risk of entering the market during periods of high volatility.
For example, if you plan to allocate $13,500 to each stock, you could start by investing $1,350 in Intact and $1,350 in Manulife today. If you’re using commission-free platforms like Wealthsimple, this approach allows you to build your position without worrying about transaction fees. If you’re trading on platforms that charge fees, it might be wise to purchase in larger amounts to minimize costs.
The Foolish investor takeaway
By strategically adding these Canadian insurance stocks to a quality diversified portfolio, you could potentially earn solid long-term returns and a reliable income stream. The market correction presents a unique opportunity to invest in these companies at attractive prices –setting the stage for a wealthy future.
