Bank stocks are always a great option for investors that are looking for some stable and recurring dividend income to add to their portfolios. And with bank stocks not doing terribly well this year, that makes some of them very attractive to put into a TFSA for both their potential upside and dividend income.
Below are three good bank stocks that pay at least 4% in dividend income.
National Bank of Canada (TSX:NA) may not be one of the Big Five, but it’s still a great option for investors, as it offers a lot of consistency and predictability for investors.
It currently pays its shareholders a dividend of over 4.3% per year. And like many bank stocks, it regularly increases its payouts as well, making it ideal inside of a TFSA, as it can help you earn a higher rate down the road.
The stock has risen by more than 25% in the past five years, and it’s still currently trading at less than twice its book value. It’s a solid buy for a company that saw its profits grow by 11% in its most recent fiscal year, while net revenues were up by 9%.
Overall, there haven’t been many surprises in the company’s earnings over the past few years and that’s an important feature for a dividend stock.
Laurentian Bank (TSX:LB) has a market cap of around $2 billion and is a much smaller bank stock than National Bank. However, it trades at an even lower price, below its book value. The one downside is that the stock has not been as stable as National Bank’s has been and has fallen 15% over the past two years.
But that has been good news for its dividend, as it has pushed its yield up to around 5.9%, which is about as high as you can get for a bank stock. It’s one of the benefits of investing in a smaller, less popular bank stock that investors don’t price up as high as the Big Five.
And that doesn’t make Laurentian a worse buy, as the company still produces consistent results. Over the past 10 quarters, net income has ranged between $40 million and $60 million. It has also increased its payouts over the years as well, meaning that investors won’t miss out on a growing dividend by investing in Laurentian.
Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is one of the few large banks that offers a yield of more than 4%. And its yield is well in excess of that today, currently paying investors a dividend of 5.5% annually. That’s a great deal to be had for not only a top bank stock, but also a stock that has some strong growth prospects as well.
In fiscal 2018, the company’s net revenues grew by 9%, and the year before that they increased by 8%. Those are some strong growth numbers from a bank stock. And with a great opportunity to grow its reach in the U.S., CIBC could see its financials continue to get stronger in the years ahead.
What’s perhaps most surprising about CIBC is how cheap the stock is today, trading at less than nine times its earnings and around just 1.3 times book value. Having fallen by 16% in just the past year, it could be a great time for investors to buy the bank stock at a very attractive price.
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 David Jagielski has no position in any of the stocks mentioned.