When the stock market got choppy recently and all those high-growth overvalued tech stocks took a tumble, investors fled to value stocks. These are large-cap, blue chip companies with good balance sheets, strong cash flow, profitability, and ever-increasing dividends with long, consistent payout histories.
Fortunately for Canadian investors, our stock market is full of these heavy-hitters. Today I’ll be profiling two top stocks from the banking industry, part of the financial sector which was a top performer in 2021 and 2022 so far due to the prospect of rising interest rates.
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Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is one of Canada’s “Big 5” banks. BNS provides various banking products and services in Canada, the U.S., and internationally, operating in four segments: Canadian banking, international banking, global wealth management, and global banking and markets.
BNS currently has a forward annual dividend yield of 4.30%, with a five-year average dividend yield of 4.68%, which is quite respectable. The payout ratio of 46.75% is sustainable and reasonable. BNS recently increased dividends by 11% in 2021, and looks to continue that as they remain profitable.
Technicals wise, BNS currently trades at around $92, close to its 52-week high of $93.34. The stock has a five-year monthly beta of 0.85, making it slightly less volatile than the overall market. BNS is also trading well above both its 50-day and 200-day moving averages of $88.8 and $81.81, respectively, which could indicate an overall bullish trend.
Canadian Imperial Bank of Commerce
Canadian Imperial Bank of Commerce (TSX:CIBC)(NYSE:CIBC) is another member of the “Big 5.” CIBC operates in the same regions as BNS, and runs four business units: Canadian personal and business banking; Canadian commercial banking and wealth management; U.S. commercial banking and wealth management; and capital markets.
CIBC currently has a slightly lower forward annual dividend yield of 3.94%, but has a higher five-year average dividend yield of 4.89%. The payout ratio is also healthy at 41.92%. CIBC also recently increased their dividend in 2021 by 10%, and looks to continue that moving forward.
Technicals wise, CIBC currently trades at around $163, close to its 52-week high of $166.54. The stock has a five-year monthly beta of 1.02, making it as volatile as the overall market. CIBC is also trading well above both its 50-day and 200-day moving averages of $151.42 and $145.05 respectively, which could indicate an overall bullish trend.
The Foolish takeaway
Dividend growth investors chasing high yield should consider the Canadian banking sector, in particular CM and BNS. These two stocks offer excellent fundamentals, substantial dividend yields, a long history of payments, consecutive increases, and good competitive advantages. Buying and holding these two stocks as the core of an income-oriented portfolio could be a winning strategy.
