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Canadian Banks: 3 Top Stocks to Buy in 2021

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There are more reasons than one to own a Canadian bank in your investment portfolio. Whether you’re looking for growth or passive income, a Canadian bank stock could be a fit for your portfolio. 

Stability is another reason to have one of the Big Five in your portfolio. That’s not to say banks don’t experience any volatility, but there is a certain level of dependability that shareholders of the major banks can count on.  

Why own a Canadian bank?

Investors looking to build a stream of passive income should have the Canadian banks at the top of their watch lists. Not only do they own some of the longest dividend-paying streaks on the TSX, but they also pay some of the highest yields too. 

The Canadian banks don’t scream market-beating growth. The banking industry itself is far from the fastest-growing area of the market, and I don’t expect that to change anytime soon. 

So, if you’re looking to double your money as quickly as possible, the banks aren’t for you. But if you have the time horizon that allows you to patiently earn market-beating growth over the long term, I’d suggesting adding at least one of the Big Five to your watch list.

To top it all off, the Canadian banks are relatively cheap right now. From a valuation perspective, they’re trading at bargain prices compared to other market-beating stocks. 

Here are my top three bank stocks for investors that are committed to holding on to their shares over the next decade.

Royal Bank of Canada

At a market cap close to $200 billion, Royal Bank of Canada (TSX:RY)(NYSE:RY) is not only the largest bank in the country but one of the largest stocks on the TSX. There aren’t many Canadian companies I’d recommend before RBC if you’re in search of a dependable long-term stock to hold in your portfolio. 

Shares are up a market-beating 60% over the past five years. And that’s not even factoring in the bank stock’s 3.3% dividend yield.   

Toronto-Dominion Bank

The second bank on my list is also the second largest amongst the Big Five. What Toronto-Dominion Bank (TSX:TD)(NYSE:TD) lacks in size compared to RBC it makes up for it in growth potential.

Shares are up 50% over the past five years, which is enough to outperform the Canadian market but not RBC. I’m betting that this will be one of the highest growers amongst the Big Five over the next decade.

TD Bank’s U.S. presence is why I’m so bullish on the bank. Already approximately one-third of the bank’s net income is driven by its U.S. operations. What investors need to keep in mind, though, is that the majority of the bank’s U.S. operations are on the east coast, leaving plenty of growth in the coming years for its west coast expansion plans.


At a dividend yield above 4%, Scotiabank (TSX:BNS)(NYSE:BNS) would be my top pick if your goal is to earn passive income.

It’s also been paying a dividend to shareholders for more than a century. So, adding Scotiabank to a passive-income portfolio is a no-brainer.

The second reason that you may want this $100 billion bank on your watch list is similar to why TD is on my mine: its geographic presence. 

Scotiabank does have a presence in the U.S., but it’s the bank’s dominant position in Latin America that has me interested as an investor. 

Emerging market countries have a lot of growth potential in the coming years. If you’re looking for exposure to that growth, Scotiabank is a solid choice.

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 Nicholas Dobroruka has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA.

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