3 Canadian stocks to buy as interest rates rise
Image source: Getty Images
Interest rates have been increased several times this year. Earlier this month, the Bank of Canada raised the overnight rate to 1.5%. Interest rates are expected to continue to rise, as Canada tries to find a way to address the issues of runaway inflation that we have experienced since the pandemic. That said, what stocks should investors focus on today? In this article, I will discuss three Canadian stocks to buy as interest rates rise.
Consider buying this diversified business
Historically, financial institutions have seen their profit margins increase as interest rates have risen. This makes them excellent companies to invest in during times like these. The first financial company we should look at is Bank of Nova Scotia (TSX:BNS)(NYSE:BNS).
While any of the big five banks could be a good choice here, I like Bank of Nova Scotia for its excellent diversification. This company has focused a lot on international expansion, and its numbers reflect that. In 2021, nearly a third of its revenue came from sources outside of Canada. In addition, the Bank of Nova Scotia announced a 50% increase in second quarter revenue from its international business. This supports the idea that this line of business could drive the growth of the Bank of Nova Scotia in the coming years.
A Canadian dividend aristocrat, the Bank of Nova Scotia has successfully increased its dividend over the past 11 years. Perhaps even more impressively, the company has paid a dividend to its shareholders for the past 189 years. It really is an excellent company that investors should consider adding to their portfolios.
This company is a slot machine
Investors should also consider investing in insurance companies. These would make a great investment as they receive income on a recurring basis. Moreover, they only incur losses when they have to cover claims. Anyone who has worked with insurance companies will know that they don’t tend to be the most enthusiastic when it comes to covering claims.
If there is one insurance company you should invest in, it would be Manulife Financial (TSX: MFC)(NYSE: MFC). With approximately $1 trillion in assets under management, it is the largest insurance company in Canada. In 2021, Manulife reported net income of $7.1 billion, which is an increase of $1.2 billion from 2020. Manulife is also a Canadian dividend aristocrat, having increased its dividend during of the last seven years.
One of the most recognized financial institutions
Finally, investors should consider investing in Brookfield Asset Management (TSX: BAM.A)(NYSE: BAM). It is one of the largest money management companies in the world, with approximately $725 billion in assets under management. Through its subsidiaries, Brookfield is exposed to the infrastructure, real estate, renewable energy utilities and private equity markets.
Like the other two companies listed here, Brookfield is listed as a Canadian Dividend Aristocrat. It has increased its dividend in each of the past nine years. I am confident that the company could continue to perform well for shareholders, as long as its CEO, Bruce Flatt, remains at the helm. Flatt has often been compared to Warren Buffett due to their similar investment styles, large holdings, and long tenures as CEO. If there’s one person you’d want to run a business in your portfolio, it’s Bruce Flatt.