Over at least the last 10 years, Canadian bank stocks have been a solid investment choice, delivering strong stock price appreciation, strong dividend income and offering investors a beacon of strength through the good times and the bad.
We have the history to draw upon that can serve to give us confidence, and we have current results and continued dividend increases to solidify it.
Here are two Canadian banks that can offer investors healthy dividend income, strong potential returns, and preservation of capital.
Toronto-Dominion Bank (TSX: TD)(NYSE: TD)
With total assets of $1.29 trillion, up from $563 billion in 2008, TD has pretty much tied Royal Bank to become Canada’s largest bank by assets.
But TD is not interested in growing for the sake of growing, they are after profitable growth with high returns.
Not surprisingly, the stock has increased a stellar 236% in the last 10 years, all while providing investors with a strong and growing dividend.
In fact, in the last 10 years, TD’s dividend has grown at a compound annual growth rate of 9.14%.
In the first quarter of 2018, TD increased its dividend by 12%, and there is no reason to assume that their yearly dividend increases will not continue.
TD’s strategy has been to focus on the lower risk retail side of the business and continue to expand in the US.
The success of this strategy is evidenced by the fact that TD Bank is now the sixth largest North American Bank by total assets and by market capitalization.
TD’s latest results continue to demonstrate the success of its strategy, and the upside resulting from its interest rate sensitivity. Net interest margins increased 1 basis point to 2.94%, adjusted EPS increased 20%, and capital ratios improved significantly.
Bank of Nova Scotia (TSX: BNS)(NYSE: BNS)
Bank of Nova Scotia stock is down 11% year-to-date as it has just undergone a period of significant acquisitions to the tune of $7 billion, which have brought some execution risk to the stock, but also higher future growth.
And it also follows the $1.7 billion equity raise, which has diluted current shareholders in the short-term.
But I would watch this stock with the longer-term in mind.
With a greater share of the wealth management market and the potential synergies that will come from these acquisitions, this represents an opportunity to get into the stock for its long-term upside.
The latest quarter showed that loans are holding up well, and net interest margin increased 5 basis points to 2.4%.
Currently showing a dividend yield of 4.69% compared to TD’s 3.67%, Bank of Nova Scotia offers a compelling valuation and future growth profile.
