TFSA Investors: 2 Banks Stocks Yielding up to 4.7%

Investors looking for a boost to their TFSA this fall should look to stocks like National Bank of Canada (TSX:NA) and Bank of Nova Scotia (TSX:BNS)(NYSE:BNS).

| More on:
Bank sign on traditional europe building facade

Image source: Getty Images

The annual contribution to a Tax-Free Savings Account (TFSA) grew to $6,000 in 2019. The results of the federal election next week may be consequential for this relatively new registered account. In 2015, the Trudeau-led Liberal government decided to drop the annual contribution amount from $10,000 to $5,500 in 2016. As it stands today, a minority government for the Conservatives or Liberals appears to be the most likely result. In such an event, investors should not rely on any major changes to annual contribution room.

Bank stocks have bounced back nicely in the early fall, which is why I want to focus on two top options for a TFSA portfolio today. These equities are both trading close to 52-week highs. Are they worth buying today? Let’s dive in.

National Bank

National Bank (TSX:NA) stock has climbed 22.9% in 2019 as of close on October 15. The smallest of the Big Six Canadian banks has been one of the top performers over the past decade. It has achieved average annual returns of 11% over the last 10 years. Back in July, I’d recommended National Bank as one of my top three bank stocks to scoop up ahead of earnings.

In the third quarter, National Bank saw net income rise 7% year over year to $608 million and diluted earnings per share increased 9% to $1.66. The bank reported year-over-year earnings growth in its four major segments, including a 28% increase in net income in U.S. Specialty Finance and International to $69 million. In the year-to-date period, diluted earnings per share have climbed 6% to $4.67.

Back in May, National Bank increased its quarterly dividend payout to $0.68 per share. This represents a 4% yield. The stock still boasts a price-to-earnings (P/E) ratio of 10.8 and a price-to-book (P/B) value of 1.8, putting it in favourable territory.

Scotiabank

Scotiabank (TSX:BNS)(NYSE:BNS) is sometimes called Canada’s “international bank” because of its large global footprint, especially in Pacific Alliance nations. In August, I’d suggested that investors should jump on its share price ahead of its third-quarter earnings release. Shares have climbed 10% over the past three months as of close on October 15.

The bank saw its quarterly profit come in at $1.98 billion, or $1.50 per diluted share, in Q3 2019 compared to $1.94 billion, or $1.55, in the prior year. On an adjusted basis, diluted earnings per share rose to $1.88 compared to $1.76 in the third quarter of 2018. Scotiabank’s International Banking segment was once again a source of strength as profit rose to $781 million over $519 million, propelled by strong loan growth in Pacific Alliance countries.

Investors got more good news as Scotiabank raised its quarterly dividend payout to $0.90 per share. This represents a 4.7% yield at the time of this writing. Scotiabank stock possesses a P/E ratio of 11.3 and a P/B value of 1.4 as of close on October 15. Shares have dipped outside technically overbought territory since the late September surge.

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 Ambrose O'Callaghan has no position in any of the stocks mentioned. Bank of Nova Scotia is a recommendation of Stock Advisor Canada.

More on Bank Stocks

calculate and analyze stock
Bank Stocks

Better Than Banks: Why goeasy Is 1 of the Best Stocks to Buy Now

Bank stocks are typically excellent long-term investments, but right now, this growth stock is so cheap that it's one of…

Read more »

edit Four girl friends withdrawing money from credit card at ATM
Bank Stocks

Should You Buy Canadian Bank Stocks in the Face of a Potential Recession?

Royal Bank of Canada (TSX:RY)(NYSE:RY) stock a is a great blue-chip name that investors should not hesitate to buy on…

Read more »

Bank sign on traditional europe building facade
Bank Stocks

Banking Stocks: The Cure to a Down Market?

Canadian banking stocks like Toronto-Dominion Bank (TSX:TD)(NYSE:TD) are outperforming the S&P 500 this year. Here's why.

Read more »

edit Four girl friends withdrawing money from credit card at ATM
Bank Stocks

Bank Earnings: Did TD Stock or Royal Bank Come Out on Top?

TD (TSX:TD)(NYSE:TD) stock and Royal Bank (TSX:RY)(NYSE:RY) stock both reported earnings on Thursday, beating earnings estimates.

Read more »

investment research
Bank Stocks

Royal Bank (TSX:RY) Raises Dividend: Time to Buy the Stock?

Royal Bank is giving investors another raise. Is the stock too cheap to ignore?

Read more »

analyze data
Bank Stocks

CIBC (TSX:CM) Raises Dividend: Should You Buy the Stock?

CIBC stock is down on the latest earnings report. Are the shares oversold?

Read more »

worry concern
Bank Stocks

Which Is the Better Pick: Suncor (TSX:SU) or 1 Big Bank?

Choosing between a resurgent oil bellwether and a big bank stock isn’t easy, because both are solid and profitable investments.

Read more »

think thought consider
Bank Stocks

Millennials: Get Through This Downturn With $173 Each Month!

With shares trading downwards, many millennial and generation Z investors may be in panic mode. But instead, get in on…

Read more »