Income Investors: Is Laurentian Bank of Canada Worth Placing on Your Radar?

Laurentian Bank of Canada (TSX:LB) is an underrated dividend-growth king. Should you give it a look today?

| More on:

If you’re a retiree or an income investor who depends on the income from their stocks, then you can’t go wrong with any one of the Big Five banks, a telecom, or a utility. But what about some of the lesser-known income stocks that nobody talks about? These hidden gems could offer investors a safe, growing dividend as well as nice long-term capital gains if you know where to find them.

If you’re not from Quebec, then you’ve probably never heard of Laurentian Bank of Canada (TSX:LB). The bank provides services to individuals as well as small- and medium-sized businesses. It’s well known for its specializations that cater to small businesses as well as real estate developers. The bank has over $41 billion worth of assets, and it’s well positioned to become a dividend-growth king over the next few years.

The stock has flown under the radar of most investors, and I don’t think it gets the credit it deserves.

The stock currently has a juicy 4.3% dividend yield, which has grown by a huge amount over the last decade. The stock rebounded very sharply after the Financial Crisis, but the stock essentially flat-lined under the $50 level of resistance for most of the seven years that followed. It wasn’t until earlier last year that the stock broke out to test the $60 level. Could the stock be headed on a sustained rally higher? Or is it going to flat-line for another couple of years?

Laurentian Bank may test the mid-$50 levels again, and I don’t think there’s too much room for it to run from here. The stock currently trades at a 12.6 price-to-earnings multiple, a 1.2 price-to-book multiple, and a 1.9 price-to-sales multiple, all of which are lower than the company’s five-year historical average multiples of 11.2, 1.1, and 1.5, respectively.

The stock isn’t a steal by any means; it’s actually slightly on the expensive side, so it shouldn’t come as a surprise if it doesn’t go anywhere over the next year, but this shouldn’t stop you if you’re a retiree looking for a stable source of income.

The company is a dividend-growth king, and you’ll do very well over the long run, even if the stock market falls flat on its face. The stock is starting to give up a portion of the gains it enjoyed late last year, so I’d sit on the sidelines and wait for a better entry point when the dividend yield is closer to 5%. You’ll enjoy a better margin of safety to go with a fat, growing dividend that will grow for many years.

Sure, you could stick with a Big Five bank, but I think it’d be worthwhile to add Laurentian Bank to your radar. It’s a dividend-growth king like its big brothers, and if it gets substantially cheaper than them, you should probably load up.

Stay smart. Stay hungry. Stay Foolish.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any stocks mentioned.

More on Bank Stocks

Beware of bad investing advice.
Bank Stocks

Shocking Declines: Canadian Stocks That Disappointed Investors in 2024

TD Bank and Telus International are two TSX stocks that are trading below 52-week highs in December 2024.

Read more »

Investor reading the newspaper
Bank Stocks

These Cheap Canadian Bank Stocks Offer 5% Yields

Bank of Nova Scotia (TSX:BNS) and another 5%-yielder are worth banking on for the long run.

Read more »

coins jump into piggy bank
Stocks for Beginners

Is Laurentian Bank Stock a Buy for its 6.5% Dividend Yield?

Laurentian Bank stock may have a stellar dividend yield, but there are several risks involved with taking on this stock…

Read more »

a person looks out a window into a cityscape
Bank Stocks

Should You Buy TD Bank Stock While it’s Below $76?

TD Bank stock dips below $76! With a 5.6% yield and robust growth prospects, is this the buy opportunity contrarian…

Read more »

TD Bank stock
Bank Stocks

TD Bank Stock: Buy, Sell or Hold for 2025?

TD Bank stock slipped after reporting fourth-quarter 2024 earnings.

Read more »

woman analyze data
Bank Stocks

1 Marvellous Canadian Dividend Stock Down 17% to Buy and Hold Forever

TD stock has hit a rough patch. It's trading near 52-week lows, with shares dropping after recent earnings. But what…

Read more »

Paper Canadian currency of various denominations
Bank Stocks

Is BMO Stock a Buy Now?

BMO stock recently hit a 12-month high. Are more gains on the way?

Read more »

open vault at bank
Stocks for Beginners

Are TD Stock and BNS Stock Smart Buys for Canadian Investors?

TD stock and Scotiabank both delivered earnings this week, so let's look at whether now is the time to buy,…

Read more »