10 best financial services stocks to buy for long-term stability

Summary

• These TSX-listed 10 financial services stocks offer healthy returns.
• Apart from banks, financial services are a crucial component of Canadian investors equity portfolio.
• Canadian financial sector has outperformed the broader market year to date.

Financial services is one of the most matured sectors in Canada, with players offering diversified services through their long-established presence in the market. This sector’s significance is evident through the composition of the benchmark S&P/TSX Composite Index, in which financial sector comprises the largest share of 31.5 per cent.

The sector has outperformed the broader market as the benchmark index grew 16.54 per cent year to date, while the S&P/TSX Capped Financial Index was up nearly 21.6 per cent in the same period. This is why financial services are a crucial component of Canadian investors equity portfolio.

Let’s now look at some financial stocks which investors may consider in 2021:

1. Senvest Capital Inc. (TSX:SEC)

Senvest Capital is an asset management company managing equities and real estate investment portfolio for US-based clients. It also manages two funds focused on institutions and high-net worth individuals.

The financial services company commands an over C$ 1 billion market capitalization and offers to its investors C$ 434.30 earnings per share (EPS).

Its net income expanded multifold in the third quarter ended March 31, 2021, as against a net loss recorded in the corresponding period last year.

Its returns were about 129.3 per cent in the year-to-date (YTD) period, while the sectoral S&P/TSX Asset Management & Custody Banks (Sub Industry) Index was up 87.8 per cent in the same period.

2. Trisura Group Ltd. (TSX:TSU)

International insurance firm Trisura Capital is a top financial services player in Canada with a C$ 1.7-billion market capitalization. Its offerings include specialty property and casualty insurance, with operations predominantly in Canada.

The stock was recently added to the Canadian benchmark index, S&P/TSX Composite Index, highlighting its key presence as a financial services provider.

Trisura Group’s stock returned about 93 per cent in the YTD period, while the benchmark index touched 66.6 per cent growth in this period.

Its stock currently trades at C$ 170.27 on the TSX, slightly lower than its 52-week high of C$ 172.75, which it touched on July 2, 2021.

3. goeasy Ltd (TSX:GSY)

Offering credit services largely for household items, goeasy Ltd is one of the top price gaining stocks on the TSX. It also offers merchandise leasing services like credit for household furnishings, and home electronics products.

With a share price of C$ 163.65 as of July 2, 2021, the credit services provider has a market capitalization of about C$ 2.69 billion. The stock offers C$ 15.12 as EPS, has a P/E ratio of 10.60, and a price-to-book (P/B) ratio 4.73.

The company said that its loan portfolio grew 10 per cent year-over-year (YoY) to C$ 1.28 billion as its total loan generation in the first quarter ended March 31, 2021, increased 13 per cent YoY. The stock’s adjusted quarterly net income rose 67 per cent to C$ 36.7 million.

4. Intact Financial Corporation (TSX:IFC)

Another top performing financial services company, Intact Financial also offers specialty and casualty insurance through its broker network and BrokerLink, its wholly-owned subsidiary, with maximum premiums written for personal automotive insurance.

The insurance firm has a current dividend yield of 1.956 per cent. Its last announced dividend was C$ 0.83 apiece, paid on June 30, 2021. The company’s dividend yield grew at an annual rate of 7.51 per cent in the last three years.

The C$ 29 billion market cap company has a 16.90 P/E ratio and 3.37 P/B ratio. It offers an 18.56 per cent return on equity.

5. Cymbria Corporation (TSX:CYB)

The asset management company is a top performer in the Canadian financial services sector, as well as a top TSX-listed price performer. The company invests in a concentrated portfolio of companies from across the world, operating in several sectors.

The asset management company has a C$ 1.5 billion market capitalization, and invests in sectors including financial services, information technology, healthcare, energy, real estate and consumer discretionary/staples, among others.

The company recently increased its portfolio’s exposure to Ontario-based EdgePoint Wealth Management Inc., a financial services firm. It now holds a 16.6 per cent stake in the company, valued at C$ 244.3 million.

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6. Sun Life Financial Inc. (TSX:SLF)

The insurance company is one of the three largest insurance companies in Canada, offering individual and corporate policies for retirement, insurance, apart from offering wealth management services, which generate about a third of the company's total profits.

It recorded a 12.56 per cent jump in its returns in the YTD period, while the benchmark TSE 300 Composite Index declined marginally in this period. The sectoral S&P/TSX Life & Health Insurance (sub industry) index was down 6.9 per cent in the same period.

It commands shareholder stake worth over C$ 37.4 billion, with an EPS of C$ 5.04. It has a dividend yield of 3.442 per cent, currently. The company announced C$ 0.55 as its last quarterly dividend.

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7. Manulife Financial Corporation (TSX:MFC)

Another one of the three largest insurance companies operating in Canada, Manulife Financial offers insurance and wealth management services to its customers based out of Canada, US and Asia. The company reported assets under management worth C$ 1.3 trillion as of December 31, 2020.

Its total returns jumped 32.5 per cent in the last one year, while the benchmark index was 2.37 per cent higher in the same period.

It commands a C$ 47.8-billion market capitalization and has a 4.549 per cent dividend yield. It distributed quarterly dividend payout of C$ 0.28 apiece and offers 4.6 per cent yield.

8. Canadian General Investments Limited (TSX:CGI)

Canadian General Investments is a Canada-based closed-end investment fund which invests in medium- to long-term investments. It invests in companies across sectors including materials, financials, energy, real estate and communications, among others.     

The company’s stock closed at C$ 38.80 on July 5, 2021, at a slight discount to its 52-week high of C$ 39.47 (July 2, 2021).

The asset management company has an over C$ 809 million market capitalization, and offers 31.77 per cent as ROE.

9. Clairvest Group Inc. (TSX:CVG)

With a market capitalization of over C$ 990 million, the asset management company invests in Canadian equities with a potential to offer healthy returns.

The company recorded a net income of C$ 14.8 million in the fourth quarter ended March 31, 2021, as against a net loss recorded in Q4 2020.

Most of its investee companies’ operating performance improved during the fiscal year, and the company expects a continued momentum in fiscal year 2022.

10. Home Capital Group Inc. (TSX:HCG)

A top-performing financial services company, Home Capital Group is a specialty lender offering residential and commercial lending services, securitization and credit card services.

Home Capital Group’s market capitalization, as of July 5, 2021, was over C$ 1.9 billion with over 50.8 million outstanding shares.

The company has a P/E ratio of 9.20, while its P/B ratio is 1.125. The stock has a 1.74 debt-to-equity ratio, and offers 13.79 per cent as ROE.