CIBC (TSX:CM) Stock Is a Buy After a Solid Third Quarter

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is fast becoming the stock pundit’s Big Five ticker of choice.

| More on:
edit Four girl friends withdrawing money from credit card at ATM

Image source: Getty Images

Banking should technically be one of the most defensive asset classes to invest in, given its integral role in the economy. However, this isn’t necessarily the case, and in fact banking can be a rather volatile space in reality.

Investors may remember the banking sector’s disappointing performance at the start of the summer, when a mix of international trade woes coincided with a rash of earnings misses. In short, the Big Five showed they couldn’t always be counted on to be defensive.

However, the argument could be made that at least some of those misses could be accounted for by provisions for bad loans as banking bigwigs eyed the macroeconomic stressors on the horizon and carefully repurposed funds.

Indeed, with positive sounds coming from Bay Street, Canadian banks are once again finding favour with investors seeking safety.

The cheapest Bay Street banker is hot right now

Raising its dividend after a third-quarter that saw profits beat expectations, CIBC (TSX:CM)(NYSE:CM) looks like a banking stock of an altogether different stripe at the moment.

While some market observers may tip TD Bank as the Big Five ticker to get behind given its access to growth in the U.S. markets, or Scotiabank for its exposure to the Pacific Alliance, CIBC offers a handsome dividend yield with attractive market ratios.

CIBC just turned in a solid Q3, which adds to a great track record. Combined with a consistently growing dividend and very attractive market ratios, CIBC is quite possibly the best of the Bay Street bankers to add to a new or pre-existing passive income portfolio.

As with its competitor, Scotiabank, this stock can form the defensive backbone of a tax-free savings account (TFSA) or registered retirement savings plan (RRSP).

Trading below its own historic price-to-earnings multiple at prices not seen in the last three years, CIBC stock is an absolute steal right now.

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) (Scotiabank), is an attractive play even during mediocre times for its unparalleled access to the financial markets of the Pacific Alliance.

More so than any other Canadian bank, Scotiabank can offer Canadian investors a way to buy into South American markets while staying invested in the domestic banking industry.

Shareholder returns have been an issue for Scotiabank over the last 10 years, as a market observer may note, with the bank trailing behind the rest of the financial powerhouses of the Big Five.

However, there are several excellent reasons to buy and hold this stock in your dividend portfolio. Indeed, an investment in Scotiabank could even form the defensive core of a new portfolio built around reliable passive income.

The bottom line

With a competitive edge at the moment, CIBC is a decently valued stock with an attractive yield. Investors eyeing the U.S. for a possible market correction may in fact want to steer clear of heavily exposed stocks such as TD Bank and bet on the Canadian economy or overlooked growth markets such as the Pacific Alliance being comprehensively served by Scotiabank.

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 Victoria Hetherington has no position in any of the stocks mentioned. Scotiabank is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

Question marks in a pile
Dividend Stocks

Where Will Brookfield Infrastructure Partners Stock Be in 5 Years?

Brookfield Infrastructure Partners (TSX:BIP.UN) kicked off 2024 with a bang. Where will it be in five years?

Read more »

Retirement
Dividend Stocks

Golden Years Gain: Your CPP Benefits at Age 70

CPP users delaying pension payments until 70 will receive substantial monthly income streams in the golden years.

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

3 Dividend Stocks You Can Safely Hold for Decades

Top TSX dividend stocks are on sale.

Read more »

Dividend Stocks

Where Will Canadian Utilities Stock Be in 5 Years?

Canadian Utilities (TSX:CSU) is a classic example of a stock where the dividend is all you get. Can the company…

Read more »

Man holding magnifying glass over a document
Dividend Stocks

2 Stocks I’m Watching for Big Passive Income

Consider Bank of Nova Scotia (TSX:BNS) and another top passive-income play to power your dividend portfolio!

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

These top TSX stocks have increased their dividends annually for decades.

Read more »

bulb idea thinking
Dividend Stocks

2 Supercharged Dividend Stocks to Buy if There’s a Stock Market Sell-Off

These two top stocks offer attractive yields, have reliable operations and are dividend aristocrats, making them two of the best…

Read more »

question marks written reminders tickets
Dividend Stocks

Better Buy: Loblaw Companies or Metro Stock?

Loblaw Companies (TSX:L) stock is riding on recent momentum. Meanwhile, Metro (TSX:MRU) is executing for future earnings growth.

Read more »