2 Top Canadian Bank Stocks to Buy for March 2022

Whether you want to continue riding the growth wave the banks are on or you are hoping for a normalization, there are two banks that should be on your radar for this month.

| More on:
Bank sign on traditional europe building facade

Image source: Getty Images

Before 2020, most investors looked into bank stocks for their dividends. But the trend post-pandemic has been quite different. Most banking stocks have shown incredible growth post-pandemic, growing more in less than a couple of years than they did in the past several ones.

However, the growth momentum will run out sooner or later. It can be as soon as this month, or it may take months yet to run out. There are two top banking stocks that should be on your radar for either eventuality.

The highest-yielding stock

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is currently the highest-yielding bank stock among the Big Six, and that’s after its epic growth run of 83% since its market crash valuation. That’s more growth than the stocks exhibited in the past several years. The stock is also trading at a 22% premium compared to its pre-pandemic peak.

The bank is currently offering a juicy 4.35% yield, and it recently grew its payouts by $0.1 per share, an 11.1% bump from its payouts in 2021. If the stock starts to normalize and fall to or below its pre-pandemic value, the yield will become even more attractive.

Even though the short-term growth potential of the stock was quite unappealing during the last three or four years before the pandemic and the post-pandemic growth has more to do with the sector as a whole than the stock itself, the long-term growth potential might be decent enough. So, if you can buy the stock at a dip and lock in a good yield, you may consider holding on to it for as long as possible.

The best growth stock

Among the Big Six, National Bank of Canada (TSX:NA) has been the best growth stock for a while now, and the post-pandemic sector momentum has only fed its natural pace. It’s the reason the stock is currently trading at a 35.8% premium to its pre-pandemic peak. Its 136% growth from the market crash valuation is significantly higher than the sector average.

As the smallest member of the Big Six, the market cap of the National Bank is relatively small compared to the others. Its $34.3 million market cap is less than half the market capitalization of the next bank in line (CIBC), and that’s after the current growth run, which has pushed its market value higher than it has ever been. Yet it shares the same stability that is characteristic of the Canadian banking sector.

Its yield, though not on par with BNS, is not to be despised. The current 3.4% yield is the result of a massive 22.5% boost.

Foolish takeaway

The banking stocks are among the hottest stock investment asset classes in Canada right now, but there is a lingering fear that the strong growth will result in an equally brutal correction. However, a hard fall may be positive from a dividend investing perspective, as you may be able to lock in a much tastier 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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA.

More on Bank Stocks

Question marks in a pile
Bank Stocks

Should You Buy Canadian Western Bank for its 4.8% Dividend Yield?

Down 35% from all-time highs, Canadian Western Bank offers a tasty dividend yield of 4.8%. Is the TSX bank stock…

Read more »

analyze data
Bank Stocks

The Average Canadian Stock Investor Owns This 1 Stock: Do You?

This Canadian stock has about 49% ownership by the public, and with growth and dividends to consider, it's a top…

Read more »

falling red arrow and lifting
Stocks for Beginners

1 Dividend Stock Down 18% to Buy Right Now

CIBC (TSX:CM) is a strong dividend stock investors should certainly consider not just for passive income, but future growth as…

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Tech Stocks

Forget TD Stock: 2 Tech Stocks to Buy Instead

TD remains a solid income stock but two outperforming tech stocks are better buys for their strong growth and upside…

Read more »

Question marks in a pile
Bank Stocks

Where Will Royal Bank of Canada Stock Be in 5 Years?

Royal Bank's continued focus on a strong capital position plus its acquisition of HSBC will likely ensure prosperous times ahead.

Read more »

Payday ringed on a calendar
Bank Stocks

How to Build a Bulletproof Monthly Passive-Income Portfolio With Just $10,000 and TD Stock

TD (TSX:TD) stock has been a poor performer over the last few years, but could be a big passive-income winner…

Read more »

Man considering whether to sell or buy
Bank Stocks

Is RBC Stock a Buy, Sell, or Hold?

Shares of Royal Bank of Canada have delivered game-changing returns to shareholders in the last two decades. Is RBC stock…

Read more »

Dice engraved with the words buy and sell
Bank Stocks

Is Scotiabank (BNS) Stock a Buy, Sell, or Hold?

Let's dive into whether the Bank of Nova Scotia (TSX:BNS) remains a solid buy or if it's more of a…

Read more »