The 3 Best Bank Stocks to Buy After Earnings

Canadians should target top bank stocks like Toronto-Dominion Bank (TSX:TD)(NYSE:TD) after Q1 earnings in early March.

| More on:
Bank sign on traditional europe building facade

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Not all bank stocks are created equal, but sometimes it is easy to fall into that supposition. Canada’s top banks released their first-quarter results in late February and early March. BMO Covered Call Canadian Banks ETF (TSX:ZWB) has climbed 5.5% month over month as of late-afternoon trading on March 4. Shares of the ETF have increased 8.4% from the prior year. Today, I want to look at my three favourite bank stocks to consider after first-quarter earnings season. Let’s dive in.

Why TD Bank is my top bank stock today

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is the second-largest financial institution in Canada. Its shares have climbed 8.7% in 2021 at the time of this writing. The stock is up 14% from the prior year.

The bank released its first batch of 2021 results on February 25. Like its peers, TD Bank thrived in the first quarter. Adjusted net income came in at $3.38 billion, or $1.83 per share — up from $3.07 billion, or $1.66 per share, in the prior year. Net income in its Canadian Retail segment rose 14% on the back of improved revenues and lower provisions for loan losses. Its U.S. Retail segment posted a 13% decline in net income due to lower deposit margins and fee income. Regardless, TD Bank beat expectations in a strong first quarter.

Shares of TD Bank last had a price-to-earnings (P/E) ratio of 11. This is the most favourable among its peers. Moreover, the bank stock offers a quarterly dividend of $0.79 per share. That represents a 4% yield.

Royal Bank delivered strong results in Q1 2021

Royal Bank (TSX:RY)(NYSE:RY) is the largest bank in Canada and the biggest stock on the TSX by market cap. Its shares have climbed 5% in 2021 so far. Moreover, the bank stock is up 10% from the prior year.

Canada’s top bank delivered strong results in the first quarter. Net income rose 10% from the prior year to $3.8 billion, while diluted earnings per share rose 11% to $2.66. Moreover, net earnings and EPS were up 19% from the fourth quarter of 2020. Like TD Bank, Royal Bank benefited from reduced provisions for loans losses and improved retail banking conditions. Royal Bank was also fueled by higher trading fees.

This top bank stock last had a P/E ratio of 13. Royal Bank offers a quarterly dividend of $1.08 per share, representing a 3.9% yield.

One more bank stock to snag right now

Bank of Montreal (TSX:BMO)(NYSE:BMO) is the third bank stock I want to look at after earnings season. Shares of BMO have climbed 10% in 2021 so far. The stock is up 21% from the same time in 2020.

The Montreal-based bank released its first-quarter 2021 results on February 23. BMO also beat expectations as it posted a profit of nearly $2.02 billion, or $3.03 per diluted share — up from $1.59 billion, or $2.37 per diluted share, in Q1 2020. The report followed a common trend. BMO’s provisions for loan losses were down. Meanwhile, its U.S. business provided strong growth in the quarter.

BMO stock possess a solid P/E ratio of 13. It last announced a quarterly dividend of $1.06 per share. This represents a 3.9% yield.

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 owns shares of ROYAL BANK OF CANADA and TORONTO-DOMINION BANK.

More on Investing

Workers use a microscope to do medical research in a modern laboratory.

Is Now the Time to Buy Health Care Stocks?

Health care stocks are on the up, but does that mean you should go ahead and buy anything? In short:…

Read more »

Volatile market, stock volatility

2 Volatile Stocks to Hold for a Decade

The market is full of opportunities for investors. But does that opportunity include some volatile stocks to hold?

Read more »

Arrowings ascending on a chalkboard

1 Under-the-Radar U.S. Stock to Buy in August

Canadians on the hunt for an undervalued and under-the-radar U.S. stock should consider Match Group Inc.

Read more »

Woman has an idea
Dividend Stocks

2 Low-Risk Growth Stocks Paying Great Dividends

These top TSX dividend stocks give investors exposure to interesting growth opportunities.

Read more »

A person builds a rock tower on a beach.
Dividend Stocks

Got $300? 2 Simple TSX Stocks to Buy Right Now

These two simple TSX stocks have everything a long-term investor looking to dollar cost average into a position wants right…

Read more »

A golden egg in a nest
Dividend Stocks

Millennials: No Excuses! Start Saving for Retirement Right Now.

Millennials, we need to stop complaining and start bragging. We're great savers, so it's time to start investing in TSX…

Read more »

Value for money
Dividend Stocks

3 UNDERVALUED TSX Stocks to Buy in August

Here are some attractively valued TSX stocks for the long term.

Read more »

A young man throwing and catching his daughter above his head
Dividend Stocks

Parents: Double Your CCB Payments This Month!

Parents can use those CCB payments to their benefit and double them this year month after month -- no waiting,…

Read more »