3 Top Bank Stocks to Buy This Summer

The Canadian economy has continued to rebound, which should inspire investors to snatch up bank stocks like TD Bank (TSX:TD)(NYSE:TD).

| 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

The Canadian economy has been on the rebound since the last months of 2020. That rebound has kicked into overdrive in 2021, as the country has been able to broadly reopen. Ontario, Canada’s most populous province, just entered step two of its reopening plan. In April, I’d discussed why bank stocks were perfect targets during this recovery.

Here’s why TD Bank is still one of my favourites

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is the second-largest financial institution in Canada. Shares of TD Bank have climbed 21% in 2021 as of early afternoon trading on July 5. The bank stock is up 43% from the prior year.

In Q2 2021, TD Bank built on its strong performance to kick off the year. One of the key drivers for the increase in profit has been the decline in provisions for loan losses. This has been true for TD Bank’s peers as well. The bank delivered $3.7 billion in net earnings in the second quarter — up 144% from the prior year. On an adjusted basis, earnings per share rose to $2.04 compared to $1.76 in Q2 2021.

Shares of this bank stock still possess a favourable price-to-earnings ratio of 11. Moreover, it offers a quarterly dividend of $0.79 per share. That represents a 3.6% yield.

This bank stock is worth snatching up in July

Bank of Montreal (TSX:BMO)(NYSE:BMO) is another top bank stock that boasts a strong footprint in the United States. Shares of BMO have increased 32% in the year-to-date period. The stock has surged 73% year over year.

BMO saw its provisions for credit losses sink to $60 million compared to a whopping $1.11 billion in the prior year. Adjusted net income rose to $2.09 billion, or $3.13 on a per share basis — up from $715 million, or $1.04 per share, in Q2 2020. BMO was also bolstered by a return to profit in its Capital Markets division. Strong market performance powered earnings for BMO and its peers in this space. Overall, these results managed to surpass analyst expectations.

This bank stock last had a P/E ratio of 14. The last year of strong momentum has put its shares in less-favourable value territory compared to its peers. BMO offers a quarterly dividend of $1.06 per share, which represents a 3.3% yield.

One more bank stock to buy today

Scotiabank (TSX:BNS)(NYSE:BNS) is a noteworthy Canadian bank stock due to its international exposure, especially in Latin America. Back in late 2019, I’d suggested that this was a big reason to scoop up Scotiabank. Unfortunately, this region was hit hard at the peak of the COVID-19 pandemic in 2020. A recovery is underway, but it will likely be more gradual than top nations in the developed world.

The bank reported net income of $2.46 billion, or $1.88 per diluted share, in the quarter — up from $1.32 billion, or $1.00 per diluted share, in the previous year. Shares of this bank stock last had a solid P/E ratio of 12. It offers a quarterly dividend of $0.90 per share. This represents a 4.5% 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 has no position in any stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA.

More on Investing

Hands holding trophy cup on sky background

3 Growth Stocks That Could Be Huge Winners in the Next Decade and Beyond

Here are three top TSX growth stocks that may be worth a look, given the significant valuation declines these stocks…

Read more »

edit Back view of hugging couple standing with real estate agent in front of house for sale
Dividend Stocks

Why Real Estate Stocks Are a No-Brainer Addition to Your Portfolio

Real estate stocks, especially REITs, offer some distinct advantages over other types of stocks, making them must-have additions to most…

Read more »

Man data analyze
Stocks for Beginners

Beginners: 2 Market-Beating Stocks Just Getting Started

Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM) and Constellation Software (TSX:CSU) are proven market beaters that could continue their ways.

Read more »

oil and natural gas
Energy Stocks

Small OPEC+ Oil-Output Hike: Buy More Energy Stocks?

Energy stocks could soar higher, because oil markets will remain tight due to the small production increase by OPEC+.

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

3 Top TSX Dividend Stocks to Buy for Monthly Passive Income

Top TSX stocks with monthly dividends now trade at cheap prices for investors seeking passive income.

Read more »

edit Person using calculator next to charts and graphs

Where to Invest $500 in the TSX Right Now

Long-term investors can look to buy stocks, including Suncor Energy and Shopify, as they are poised to outpace the broader…

Read more »

Canadian Dollars
Dividend Stocks

Create Free Passive Income and Turn it Into Thousands With 1 TSX Stock

If you can't afford to invest, you can certainly create passive income another way and use that to invest in…

Read more »

falling red arrow and lifting

2 Oversold TSX Stocks That Should Bounce Back

Stocks that are oversold without an external catalyst like a market crash or a weak sector might be risky buys,…

Read more »