Why Right Now Is the Time to Buy Big Six Banks for Major Income

The Big Six banks are solid options for investors during times of uncertainty, and these two provide the opportunity for growth and passive income.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published March 18, 2022 5:25 pm EDT

This volatile market has been quite hard on Canadians. Just when we believe there is going to be some relief, the market drops once more. The beginning of 2022 has been difficult, to say the least. Shares dropped further and further as it looked like interest rates would rise, as would inflation, and then a war broke out with Russia invading Ukraine. But that’s why now is a great time to pick up the Big Six banks.

The Big Six banks in Canada continue to be some of the best places to keep your cash safe. Furthermore, after two years of no dividend growth, all six have been raising them. And what’s more, they’re likely to do that again and again.

But there are six of these banks, and I’m not saying you should buy each one. So here are the two I would consider for your portfolio today.

think thought consider — Image source: Getty Images

Toronto Dominion Bank

First up, I would definitely consider buying Toronto-Dominion Bank (TSX:TD)(NYSE:TD) among the Big Six banks. TD stocks remains one of the best thanks to a large market capitalization, incredible loan growth, expansion into the U.S., and a cheap share price.

Furthermore, TD stock increased its dividend during its last earnings report, now offering a 3.63% dividend yield as of writing. Plus, with the recent acquisition of First Horizons, TD stock will become the sixth-largest bank in the U.S. as well.

Yet because of the recent pullback in the market, shares of TD stock are cheap among the Big Six banks. TD currently trades at 12.77 times earnings, and is down 6% from all-time highs.

CIBC stock

Another of the Big Six banks I would absolutely consider is Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM). CIBC stock is perfect for investors seeking income, but it also has a lot of growth ahead of it. The bank recently overhauled its image, and is focusing on customer service. This, along with its expansion in emerging markets and the U.S., makes it a great buy today.

And among the Big Six banks it still has the highest dividend payment of $6.44 per share, or a yield of 4.05% as of writing. That dividend doesn’t look to be slowing down in growth anytime soon, as the company continues to be supported by a strong housing market, higher interest rates, and a growing customer base.

Yet again, with this pullback CIBC stock is a steal among the Big Six banks. It currently trades at 11.32 times earnings, and is slightly lower than all-time highs by 2% as of writing. Still, analysts give it a potential upside right now of 6%, so it’s still a bargain.

Foolish takeaway

Really, if the Big Six banks trade lower than all-time highs, and are supported by a solid price-to-earnings (P/E) ratio, they’re always a bargain. Over the last five years, TD stock and CIBC stock have grown by 58% and 48% respectively. That’s enormous growth all while going through a pandemic, economic fallout, and more. So if you want to keep you cash safe, but growing steady, with dividends to boot, then these are where you should buy today.