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2 financial stocks to buy
Credit services company goeasy Ltd. and insurance company Manulife Financial Corporation are both financial services stocks to buy for capital gains and growing dividends.
goeasy Ltd. (TSX—GSY)
goeasy Ltd.’s earnings are growing quickly. Even so, it’s well priced and trades at a multiple of only 11.5 times. We’ve raised goeasy’s quality rating to ‘Very Conservative’. This ‘dividend aristocrat’ has raised its dividend for eight years in a row. It remains a buy.
goeasy’s shares have fallen. But over time they’ve risen more than they’ve fallen. When the Canadian stock market bottomed in April, 2020, goeasy fell as low as $29 a share. At $138, the shares are up by nearly 376 per cent. We expect them to continue to rise.
In 2021, goeasy’s earnings jumped by nearly 38 per cent, to $10.43 a share. In 2022, its earnings are expected to go up by nearly 14.8 per cent, to $11.97 a share. Based on this estimate, the shares trade at a price-to-earnings ratio of 11.5 times. That’s low for a company whose earnings are growing quickly. The shares may even be undervalued. Nevertheless, this ‘dividend aristocrat’ is well priced.
goeasy has raised its dividend for eight years in a row. That makes it a ‘dividend aristocrat’. The current dividend of $3.64 a share is up by about 38 per cent from last year’s dividend. It yields a decent 2.64 per cent. We expect the company to continue to raise its dividend in the years ahead.
goeasy is now primarily a financial company.
The financial division continues to grow quickly. Since financial services usually generate more stable revenue than consumer stocks, we award them a higher quality rating. Accordingly, we’re upgrading goeasy’s quality rating by two notches, to ‘Very Conservative’.
goeasy expects to achieve a return-on-equity of 22 per cent from 2022 through 2024. That is, the company expects its profitability to remain high.