The Canadian financial services sector is a cornerstone of the Toronto Stock Exchange, comprising nearly 36% of the total market capitalization. This sector is dominated by a handful of large financial institutions, primarily the Big Six Canadian banks, which have long been staples of investor portfolios. With the ongoing market uncertainty, there are still opportunities to find strong financial stocks with growth potential and attractive dividends. Two names, in particular, could be good buys right now: Toronto-Dominion Bank (TSX:TD) and Manulife Financial (TSX:MFC).

Toronto-Dominion Bank: A discounted blue-chip stock

Despite being one of Canada's largest banks, TD has faced a challenging period recently. Since reaching a high of around $108 per share in February 2022, TD stock has dropped by approximately 31%. Over the past 12 months alone, it has fallen about 10%. The primary reason for this decline is not just the US$3.1 billion fine the bank paid for an anti-money laundering case but concerns about slowed growth in the U.S. market because of this case.

At its current price of $74.80 per share, TD offers a dividend yield of 5.5%, making it an attractive income investment. This yield is notably higher than the roughly 4% provided by one-year guaranteed investment certificates (GICs), which makes TD an appealing alternative for income. But what really makes TD a stock to consider now is its valuation. The stock is currently trading at a price-to-earnings (P/E) ratio of about 9.6, which is about 15% below its historical average.

For long-term investors, this valuation discount implies the potential for significant upside. If TD can regain its growth momentum, the stock could eventually trade at a higher P/E ratio, offering a potential upside of 35% over the next few years. With a solid dividend stream in the meantime, this makes TD an attractive buy for those looking for both income and growth

Manulife: A reasonably valued dividend stock

On the other side of the spectrum, Manulife, a leading life and health insurance provider, has experienced a strong run-up recently. MFC stock is up more than 50% in the last year alone. This performance might cause some investors to hesitate, fearing the stock is overvalued. However, despite its impressive 12-month climb, Manulife still trades at a reasonable valuation.

At $42.90 per share at writing, the stock has a P/E ratio of 11.4, which is quite reasonable given its strong business fundamentals and growth prospects. Analysts predict that Manulife could see annual earnings per share growth of about 7% over the next couple of years. This makes it a reasonable buy for those looking for exposure to the insurance sector, especially considering the stock's steady performance and growing dividends. At the current price, Manulife offers a dividend yield of 3.7%, which helps provide solid returns for investors.

Manulife had been trading at a significant discount for years before its recent surge, making it an excellent buy when it was undervalued. Now that the stock has reverted to a more reasonable price, investors can still expect steady returns, provided the company continues to execute consistent growth. If you're hesitant to buy at this level, you can wait for a dip for a better entry point.

The Foolish investor takeaway

For investors looking to capitalize on opportunities in the Canadian financial sector, TD Bank and Manulife offer two distinct opportunities. TD, with its discounted valuation and solid dividend yield, could surprise with outsized long-term returns when it re-ignites growth. Meanwhile, Manulife offers a balance of reasonable valuation, steady growth potential, and a reliable dividend. Both stocks are reasonable buys for different reasons, and depending on your risk tolerance and investment strategy, they could be good additions to your diversified portfolio.