This Financial Stock Down 9% Could Secure Your Retirement Income

If you want a top stock that you simply won’t have to worry about, this is the one I’d pick.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published May 28, 2025 5:00 pm EDT

| More on: FFH

When building a retirement portfolio, most investors look for a balance between reliability and long-term upside. That’s where financial stocks can shine, especially those with consistent cash flow, smart capital allocation, and a track record of weathering market volatility. Fairfax Financial Holdings (TSX: FFH) is one of those names. It doesn’t get the same attention as the big Canadian banks, but it absolutely should be on the radar of anyone looking to secure long-term retirement income.

Canadian stocks are rising — Image source: Getty Images

About Fairfax

Fairfax isn’t your typical financial stock. It operates more like a Canadian version of Berkshire Hathaway. The company, led by longtime CEO Prem Watsa, is a holding company that owns a group of property and casualty insurance businesses. It also manages a substantial investment portfolio across equities, bonds, and private investments. So, while it earns premiums from insurance underwriting, it also compounds value by reinvesting that capital smartly.

In the first quarter of 2025, Fairfax reported net earnings of US$945.7 million, or US$42.70 per diluted share. That’s a big leap from US$776.5 million, or US$33.12 per share, in the same quarter of 2024. This jump was largely due to investment gains, including US$779.5 million from common stocks and US$388.4 million from bonds. Fairfax is known for taking contrarian positions and holding them for the long term, which has paid off handsomely as markets recovered. In a climate where many insurers were still licking their wounds, Fairfax posted one of its strongest quarters ever.

Looking long term

The company’s book value per share, a critical metric for long-term value investors, increased to US$1,080.38 as of March 31, 2025. That’s up from US$1,059.60 at year-end 2024, despite the company paying a substantial dividend of US$15 per share in the same quarter. Fairfax has now grown book value at a compound annual growth rate of more than 15% since its founding in 1985. That kind of compounding is rare, and it matters a lot if you’re looking to protect and grow wealth in retirement.

Fairfax’s core insurance business also remains strong. Gross premiums written rose 5% to US$8.5 billion, while net premiums written jumped 8.4% to US$6.8 billion. Those are solid numbers, especially considering the company also faced significant catastrophe losses during the quarter, including US$692 million related to wildfires in California. Even with those losses, Fairfax posted an underwriting profit of US$96.9 million and a combined ratio of 98.5%. Anything under 100% means it was profitable on underwriting alone, excluding investment income.

Value and income

On the dividend front, Fairfax continues to reward shareholders. The company paid a US$15 per share dividend in Q1 2025. At a share price of roughly $2,282, that works out to a yield just under 1%. While that might seem low for income investors, it’s worth looking deeper. Fairfax pays one large annual dividend rather than smaller quarterly ones, and it has a long-standing history of protecting its capital base. The company has also signalled a willingness to raise dividends over time, especially as its investment gains accumulate.

What makes Fairfax especially attractive in a retirement context is its diversification. Its insurance subsidiaries span the globe, and it has investments in dozens of sectors. That kind of structure provides stability, particularly during downturns. The company is also known for buying undervalued assets, meaning it tends to perform best when others are fearful, a great characteristic to have when markets get choppy.

Bottom line

If you’re considering where to put long-term retirement funds, Fairfax deserves a look. You get exposure to insurance, investments, and global diversification, all in one. And unlike some dividend stocks that are at risk of cutting payouts during tough times, Fairfax has shown it can not only maintain its dividend, but also grow its book value, even in volatile environments.

In a world of uncertainty, Fairfax stands out as a steady hand. For investors looking to lock in stability with upside potential, this financial stock, currently trading well below its all-time highs, could be one of the more underrated picks on the TSX. It may not offer the highest yield, but its total return potential makes it a stock that could secure your retirement income for decades to come.