Revealed: 3 Top Bank Stock Picks for 2019

2019 is shaping up to be a nice entry point for great bank stocks like Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and Bank of Montreal (TSX:BMO)(NYSE:BMO).

| More on:

Image source: Getty Images.

I used to be one of those silly investors who avoided Canada’s largest bank stocks because I was concerned about the overall housing market.

Even if the average price of a house in Canada takes a tumble in 2019 — which could easily happen — I’m convinced that such an event won’t impact Canada’s banks in a major way. Yes, there’s no doubt they’ve made some questionable loans, and those mortgages could end up losing money. But the vast majority of debt issued by these banks is secured by reasonable price-to-value ratios.

I’d even argue that much of this downside is already priced in. Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is a great example. Shares are down more than 13% in the last year despite fundamentals actually improving.

I’m buying bank stocks aggressively for the first time in years. I think you should be, too. Here are my top three picks in the sector for the rest of 2019.

Bank of Nova Scotia

Not only is Bank of Nova Scotia my top bank stock pick of 2019, but I’d rank it as my number two overall pick. My top pick is Brookfield Property Partners.

I love the company’s international expansion — a move that’s already paid off in spades. The company generated a profit of $8.7 billion in 2018, with approximately $2.8 billion coming from international banking operations. This division grew profits by 16% on a year-over-year basis versus an 8% jump in the bottom line for the Canadian division.

The year 2019’s international growth could be even more impressive. Scotiabank was busy acquiring assets in the region last year, including a credit card issuer in Colombia, and banks in Chile, Peru, and the Dominican Republic. All these deals should add to the bottom line in 2019.

Investors are getting this growth potential at a fantastic price. Shares trade hands at 10.5 times trailing earnings and 9.6 times expected forward earnings. Any time you can get a premier bank for under 10 times earnings, you should go for it. Oh, and its shares yield an impressive 4.7% as well.


Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) has long been viewed as the weakest player of the five largest Canadian banks due to its smaller size and Canadian focus.

The company has taken steps to silence those critics by acquiring Chicago-based Private Bancorp. The only problem is that many analysts felt CIBC overpaid for the bank, especially when it was forced to raise the price. Private Bancorp also won’t have a big impact on the bottom line until 2020 at the earliest.

But CIBC is doing a lot right, too. Its emphasis on asset management is paying off nicely. The Canadian operations should continue performing well. And yield-focused investors have to like the dividend, which is currently just over 5%.

And to top it all off, CIBC also has the lowest P/E ratio of its peers. It trades at just 9.1 times trailing earnings and a jaw-dropping 8.4 times forward earnings. It’s incredibly cheap today.


Bank of Montreal (TSX:BMO)(NYSE:BMO) was actually the first Canadian bank to expand into the United States. It acquired Harris Bank of Chicago way back in 1984.

Harris Bank’s growth hasn’t lit the world on fire since, but the company has expanded to become one of the largest banks in the Midwest. These U.S. operations currently make up 28% of total earnings, with the goal to grow that share up to 33% in a few years.

Technology is a big part of BMO’s focus going forward. It plans to grow the bottom line by converting more customers into using primarily digital transactions, especially in the United States. It can then easily target these people with loan offers, special mortgage rates, and other perks. It has also used technology to make acquiring new customers easier, including having a credit card application system that can be completed entirely on a mobile phone.

Like the other two banks profiled, BMO trades at a very reasonable valuation. It trades at 11.3 times trailing earnings and 9.6 times forward earnings. The dividend yield is solid too, checking in at 4.1%.

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 Nelson Smith owns shares of BANK OF MONTREAL, BANK OF NOVA SCOTIA, Brookfield Property Partners LP, and CANADIAN IMPERIAL BANK OF COMMERCE.

More on Dividend Stocks

Specialty Brands faces higher raw materials costs.
Dividend Stocks

What’s Next for Premium Brands Stock?

Shares of the specialty food production and distribution company have fallen about 25% since last October.

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Dividend Stocks

2 Interesting Buys in Any Market

Here are two intriguing buys in any market climate that offer defensive appeal as well as growth and income earning…

Read more »

Dividend Stocks

TFSA Investors: 3 TSX Stocks for Tax-Free Passive Income

These Canadian corporations have strong visibility over future earnings and dividend payouts.

Read more »

Simple life style relaxation with Asian working business woman healthy lifestyle take it easy resting in comfort hotel or home living room having free time with peace of mind and self health balance
Dividend Stocks

Lazy Landlords: 3 Cheap Canadian REITs to Buy in May 2022

You can become a passive landlord today by investing in Canadian REITs. Here are three cheap REITs to consider this…

Read more »

Target. Stand out from the crowd
Dividend Stocks

4 High-Yield TSX Stocks to Buy Ahead of Their Ex-Dividend Dates

If you have some cash lying idle, consider these high-yielding TSX stocks.

Read more »

growing plant shoots on stacked coins
Dividend Stocks

Passive Income: 3 TSX Stocks With Rapidly Growing Dividends

Worried about inflation? Here are three passive-income stocks to buy that pay rapidly growing dividends.

Read more »

Family relationship with bond and care
Dividend Stocks

Retirees: 4 Safe Stocks to Buy for Decent Passive Income

Retirees can offset the impact of runaway inflation by buying safe dividend stocks to create more cash flows.

Read more »

Canadian energy stocks are rising with oil prices
Dividend Stocks

3 Canadian Energy Stocks to Buy for Reliable Passive Income

Canadian energy stocks are gushing cash. Here's three top stocks that are perfect buys for reliable passive income.

Read more »