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3 Top Bank Stocks to Consider in May

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Last week, Statistics Canada said that the Canadian economy likely grew by 6.5% on an annualized basis in the first quarter of 2021. This rebound was anticipated, as Canada looks to climb its way out of the economic troubles stirred by the COVID-19 pandemic. The country is still wrestling with high case counts, but the vaccine rollout is accelerating. In early April, I’d discussed why investors should target bank stocks as the economy recovers. BMO Equal Weight Banks ETF has climbed 18% so far this year. Today, I want to look at the best bank stocks to buy this month.

Why TD Bank is still my top bank stock to start the month of May

TD Bank (TSX:TD)(NYSE:TD) was still my favourite bank stock to scoop up in late April. Its shares have increased 17% in 2021 as of early afternoon trading on May 5. The bank stock is up 48% from the prior year.

Canadians can expect to see TD Bank’s second-quarter 2021 results later this month. In Q1 2021, the bank beat expectations and delivered revenue of $10.8 billion — up from $10.6 billion in the prior year. Adjusted earnings per share rose to $1.83 per diluted share over $1.66 per diluted share in Q1 2020. Like its peers, TD Bank benefited from rising capital markets revenue and a rebound in Canadian banking retail.

Shares of this bank stock have a favourable price-to-earnings (P/E) ratio of 12. It offers a quarterly dividend of $0.79 per share, which represents a 3.7% yield.

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This top stock is my runner-up right now

Bank of Montreal (TSX:BMO)(NYSE:BMO) is also set to release its next batch of results in late May. The bank stock has increased 21% so far this year. Shares are up 71% from the same period in 2020. It has significantly outperformed its peers in this space.

In its Q1 2021 report, BMO said that it expected the improving vaccine rollout would fuel the recovery, which would, in turn, boost the bank’s performance. It still beat expectations in the first quarter. Profit came in at $2.02 billion or $3.03 per diluted share — up from $1.59 billion or $2.37 per diluted share in the first quarter of 2020.

BMO stock possesses a solid P/E ratio of 14. Meanwhile, it last paid out a quarterly dividend of $1.06 per share. This represents a 3.6% yield.

One more bank stock to snag today

Scotiabank (TSX:BNS)(NYSE:BNS) is the final bank stock I’d snatch up today. Like our previous two bank stocks, Scotia is also set to unveil its second-quarter earnings in late May. Shares of Scotiabank have increased 16% in 2021. The stock is up 48% year over year.

The bank boasts a significant global footprint, especially in Latin America. Like TD Bank and BMO, Scotia beat expectations in the first quarter. Scotia delivered a profit of $2.4 billion, or $1.86 per diluted share, in Q1 2021 — up from $2.33 billion or $1.84 per share in the prior year. It was pleased to report that economic conditions are starting to improve across the Americas, which suffered bitterly during the peak of the pandemic in 2020.

Scotiabank stock last had a favourable P/E ratio of 14. It offers a quarterly dividend of $0.90 per share, representing a solid 4.5% yield.

On the topic of stocks to add in May...

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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 TORONTO-DOMINION BANK. The Motley Fool recommends BANK OF NOVA SCOTIA.

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