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

Question marks in a pile
Bank Stocks

Should You Buy Canadian Western Bank for its 4.8% Dividend Yield?

Down 35% from all-time highs, Canadian Western Bank offers a tasty dividend yield of 4.8%. Is the TSX bank stock…

Read more »

analyze data
Bank Stocks

The Average Canadian Stock Investor Owns This 1 Stock: Do You?

This Canadian stock has about 49% ownership by the public, and with growth and dividends to consider, it's a top…

Read more »

falling red arrow and lifting
Stocks for Beginners

1 Dividend Stock Down 18% to Buy Right Now

CIBC (TSX:CM) is a strong dividend stock investors should certainly consider not just for passive income, but future growth as…

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Tech Stocks

Forget TD Stock: 2 Tech Stocks to Buy Instead

TD remains a solid income stock but two outperforming tech stocks are better buys for their strong growth and upside…

Read more »

Question marks in a pile
Bank Stocks

Where Will Royal Bank of Canada Stock Be in 5 Years?

Royal Bank's continued focus on a strong capital position plus its acquisition of HSBC will likely ensure prosperous times ahead.

Read more »

Payday ringed on a calendar
Bank Stocks

How to Build a Bulletproof Monthly Passive-Income Portfolio With Just $10,000 and TD Stock

TD (TSX:TD) stock has been a poor performer over the last few years, but could be a big passive-income winner…

Read more »

Man considering whether to sell or buy
Bank Stocks

Is RBC Stock a Buy, Sell, or Hold?

Shares of Royal Bank of Canada have delivered game-changing returns to shareholders in the last two decades. Is RBC stock…

Read more »

Dice engraved with the words buy and sell
Bank Stocks

Is Scotiabank (BNS) Stock a Buy, Sell, or Hold?

Let's dive into whether the Bank of Nova Scotia (TSX:BNS) remains a solid buy or if it's more of a…

Read more »