2 Rock-Solid Dividend Stocks for Your TFSA

Canadian investors interested in expanding their retirement portfolios to include insurance stocks may consider Sun Life Financial (TSX:SLF)(NYSE:SLF).

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Canadian investors interested in expanding their retirement portfolios to include insurance stocks have two major options on the Toronto Stock Exchange: Sun Life Financial (TSX:SLF)(NYSE:SLF) and iA Financial (TSX:IAG).

Insurance is a safe industry with typically growing returns. On the TSX, especially, insurance stocks face very little competition. The value of life insurance premiums in Canada represent a nearly $60 billion market.

Sun Life Financial

This is a decent stock with a solid history of return. Sun Life Financial’s stock price has soared by over 331% in the past 20 years for an average capital gain of 17% per year. A 17% average return over a 20-year period is great for aspiring Canadian retirees who want stocks with an excellent long-term price history.

In the past year, the share price on the stock has increased by 20% to a historical high of nearly $60 per share. The substantial increase in price this past year alone is reason to believe that Canadian investors should still be cautious when increasing their holdings in this stock. The price may fall drastically, eroding any initial investment in the shares.

Sun Life Financial, like many insurance stocks, offers a great dividend of $2.10 per year at a rate of 3.57% of the current share price at the time of writing. This is a great dividend, and the regular compensation reduces some of the risk of owning this stock.

As long as Canadian investors plan to hold Sun Life Financial for the long term, an increased stake in this stock is a fairly good bet.

iA Financial

iA Financial is even better than Sun Life Financial. This stock’s price has performed even more profitably over the past 20 years than the more active Sun Life stock. It has taken off by over 660% in the past 20 years for an average capital gain of 30% per year. A 30% average return per year over a 20-year period means Canadian investors will be getting top returns for their investment.

Over the past 52 weeks, iA stock has surged 28.46% to a historical high of over $61 per share. The price increase over the past year may be less risky than the price increase on Sun Life. iA stock has a price-to-earnings (P/E) ratio of only 11, while Sun Life has a P/E ratio of 14.18.

iA Financial issues a smaller dividend than Sun Life. iA Financial’s dividend is $1.80 per year at a rate of 2.93% of the current share price at the time of writing. Thus, the dividend on this stock is considerably lower than many other dividend stocks on the TSX like those in the banking industry.

iA Financial may be inexpensive when looking at the P/E ratio compared to its major competitor, Sun Life, but the dividend might not be quite enough to guard your portfolio against all the volatility in today’s stock market.

Foolish takeaway

Volume is a great indication of liquidity. Sun Life is one of the most active insurance stocks on the TSX at an average trading volume of 1.4 million shares per day. High trading volume means there is plenty of demand if you need to sell your shares later.

By contrast, iA only trades about 117,233 million shares per day. Sometimes stocks with low trading volume still give shareholders price stability.

Canadian shareholders interested in purchasing shares of insurance stocks have great options in both Sun Life and iA Financial.

Just Released! 5 Stocks Under $50 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $50 a share.

Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.

Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Debra Ray has no position in any of the stocks mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Here’s Exactly How a $20,000 TFSA Could Potentially Grow to $200,000

Index funds like the iShares S&P/TSX Capped Composite Index (TSX:XIC) are tax free in a TFSA.

Read more »

Dividend Stocks

How I’d Invest $6,000 in Canadian Real Estate Stocks to Build Lasting Wealth

Canadian REITs on sale! See how grocery-anchored retail properties offering 9% yields could turn $6,000 into lasting wealth despite US…

Read more »

rain rolls off a protective umbrella in a rainstorm
Dividend Stocks

Economic Headwinds: Should You Still Consider Buying the Dip?

A market dip might seem like a bumpy road, but it can be far smoother in the future with the…

Read more »

e-commerce shopping getting a package
Dividend Stocks

Consumer Spending Plays Amidst the Current Market Dip

Consumption may go down in market dips, but certain consumer stocks are certainly better off than others.

Read more »

Asset Management
Dividend Stocks

12% Dividend Yield! I’m Buying This TSX Stock and Holding for Decades

Stocks with high-dividend yields carry risks. But they could be a good long-term investment. Here is a 12% dividend stock…

Read more »

Canadian flag
Dividend Stocks

How I’d Build a Foundation of Canadian Value Stocks in My Investment Strategy

Canadian investors can explore iShares Canadian Value Index ETF for value stock ideas to build a foundation for their diversified…

Read more »

Canadian dollars are printed
Dividend Stocks

How I’d Transform a $30,000 TFSA Into a Cash-Flow Machine

Here's why TFSA investors should consider owning dividend stocks such as Mullen Group in 2025.

Read more »

A woman shops in a grocery store while pushing a stroller with a child
Dividend Stocks

Dip Buyers Could Win Big in Today’s Market Dip

If you want to buy the dip, think long-term. Which is why this TSX stock is a top option.

Read more »