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Banks (Finance)

Diversify Beyond Banks: Canadian Non-Bank Financials with Sustainable Dividends

Strategic Insights

— 1 min read

Despite the improving third-quarter earnings of Canada's Big Five banks, analysts at The Successful Investor recommend diversifying beyond the banking sector. Canadian non-bank financials, with their focus on sustainable dividends, are poised to thrive despite economic risks. The TSI Dividend Sustainability Rating System identified seven leaders in this space, offering investors a chance to tap into steady growth prospects and dividend payments.

Key Takeaways:

  • The Big Five banks have reported improved third-quarter earnings, beating analysts' forecasts, driven by lower loan loss provisions and muted impact of U.S. trade tensions on their loan portfolios.
  • Despite a positive banking outlook, there are risks associated with ongoing trade negotiations between Canada and the United States, making diversification a prudent strategy.
  • The TSI Dividend Sustainability Rating System evaluates stocks based on factors such as dividend payment history, management commitment, and balance sheet strength to identify companies with secure dividends.
  • Seven Canadian non-bank financials, including Sun Life Financial Inc., Manulife Financial Corp., and Intact Financial Corp., have been identified as leaders with steady growth prospects and sustainable dividend payments.
  • The companies on the list have a TSI Dividend Sustainability Rating of at least seven points, indicating above-average sustainability, with some having ratings as high as 12 points.

Statistics:

  • The Big Five banks reported third-quarter earnings that beat analysts' forecasts by an average margin of 6.2%.
  • Loan loss provisions decreased by 23.1% compared to the previous quarter, contributing to the improved earnings.
  • The TSI Dividend Sustainability Rating System awards points based on key factors, with a maximum of 12 points for a company with a strong balance sheet, long-term record of positive earnings and cash flow, and commitment to dividends.
  • The seven identified Canadian non-bank financials have a combined estimated market capitalization of CAD 163.4 billion.

Sources:

  • The Successful Investor Inc.
  • The Globe and Mail (globandmail.com)
  • TSI Network
  • Pat McKeough, editor and publisher of The Successful Investor newsletter
  • Scott Clayton, senior analyst for TSI Network and associate editor of The Successful Investor newsletter

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