Got $5,000? How I’d Allocate it Across 5 Financial Stocks for Lasting Sector Exposure

Financial stocks such as Royal Bank offer investors exposure to lucrative businesses and strong, reliable dividends.

The financial sector in Canada has historically provided investors with strong long-term returns. From banking to insurance to asset management, financial stocks are a must-own for access to this lucrative sector.

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Alaris Equity Partners

Alaris Equity Partners Income Trust (TSX: AD.UN) provides capital to private, well-run, profitable businesses. In return it receives preferred shares, which collect dividends, as well as participate in the potential profit and growth of these companies. The focus is on “creating long-term partnerships with companies that have a proven track record of stability and profitability in varying economic conditions.”

Currently, Alaris yields a very generous 7.05%. This is supported by strong cash flows and earnings, which have been boosted by the company’s strong track record of investment returns. In fact, the company’s existing portfolio’s cash yield is 13%. Also, Alaris’s compound annual return on exited investments is 16%.

This financial stock is a different one, but one worth considering.

Intact Financial

Shifting gears now, I’d like to highlight Intact Financial (TSX: IFC) as a financial stock to own for financial exposure. Intact is the largest provider of property and casualty (P&C) insurance in Canada, with strong positions in the U.S., the United Kingdom, and Europe.

Over the last many years, Intact has grown by consolidating the very fragmented P&C insurance industry. The company has made countless acquisitions, which have led to a steady rise in revenue and the realization of cost synergies. Since 2019, the company’s annual revenue increased 134% to $26.5 billion in 2024. Also, Intact’s earnings per share (EPS) increased 184% to $14.43 in the same period.

Looking ahead, I expect Intact Financial to continue to make prudent strategic decisions, driving growth in both its footprint and its financial metrics.

Manulife

Manulife Financial (TSX: MFC) is a Canadian-based international financial services provider. It operates globally, providing services such as wealth management and insurance. Manulife enjoys unmatched geographic diversification, business mix, and scale.

As a reflection of Manulife’s solid positioning, we can look at its 2024 results and its dividend history. The momentum in Manulife’s business is continuing. This is reflected in an 11% increase in EPS in 2024 and a 27% increase in core earnings out of Asia.

Manulife stock has rallied 28.5% in the last year and is poised to continue its growth journey in the long run.

Power Corp

Power Corporation of Canada (TSX: POW) is an international holding company that is heavily exposed to the financial services industry. Its main holding is Power Financial (whose main holdings are Great West Lifeco. and IGM Financial). Power Corp stock has traditionally been hit by a holding company discount, but today, its shares are rising steadily.

In fact, in the last year, the stock has increased 31%. The stock is yielding a very generous 4.75%, and financial results have been strong. For example, in 2024, the company reported adjusted earnings from continuing operations of $1.20 — a 15% increase over the prior year.

Also, Power Corp. increased its dividend by 9% recently and boasts a strong history of reliable dividend payments.

Royal Bank

Royal Bank of Canada (TSX: RY) is Canada’s largest bank. Today, it’s outperforming as it enjoys the many benefits of its 2024 acquisition of HSBC. It’s true that rising provisions for capital losses continue to be a concern, but Royal Bank is well-capitalized with a strong balance sheet and diversified business.

2025 has not been a good year so far for bank stocks like Royal Bank. Economic concerns brought on partly by the tariff wars have really hit hard. However, Royal Bank has been through many crises before. The Canadian banking system is strong, and Royal Bank is well-positioned to continue to thrive in the long term.

I believe that it’s a financial stock to own for sector exposure.

Fool contributor Karen Thomas has no position in any of the stocks mentioned. The Motley Fool recommends Alaris Equity Partners Income Trust and Intact Financial. The Motley Fool has a disclosure policy.

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