Passive Income: 3 Bank Stocks for TFSA Wealth

Bank stocks offer TFSA investors secure passive income that lasts decades, but these three are my favourites right now.

| More on:
Bank sign on traditional europe building facade

Image source: Getty Images

It can be really difficult to look past what’s going on right now and think long term. I know it certainly has been for me. I’m a millennial with two kids under five that I need to support. So, thinking long term is super hard.

However, there are benefits to lock up right now, and that’s what I’m trying to focus on — especially if I’m looking to create long-term wealth for my Tax-Free Savings Account (TFSA). It comes down to bank stocks.

Why bank stocks?

Bank stocks have the best track record when it comes to making it through a recession. You know how in the Great Recession, we heard about these American banks going under? Yeah, that doesn’t happen in Canada. That’s because Canadian banks, while they might not make as much money during the good times, prepare for the bad times.

This comes down to conservative, long-term growth supported by provisions for loan losses — loan losses that are coming in right now. So, while shares are down with the Big Six banks, it’s important to look to the past and see that because of those provisions, each of the banks managed to come out relatively quickly to pre-drop share prices after the end of a recession.

With that in mind, there are three bank stocks I would consider above the rest.

My Big Three bank stocks

If I’m only choosing three bank stocks on the TSX today, it’s going to be Bank of Montreal (TSX:BMO), Toronto-Dominion Bank (TSX:TD), and Canadian Imperial Bank of Commerce (TSX:CM). Here’s why.

When it comes to growth, BMO stock and TD stock have strong pasts and stellar futures. BMO stock invested in the Bank of the West in the United States, creating a new expansion of revenue in the U.S. to lock up. TD stock has been a top 10 bank down there for years but has also expanded into credit card partnerships, wealth and commercial management, and more, bringing in substantial revenue.

For dividends, the top two have to be CIBC stock and BMO stock. Each provides the highest of the Big Six banks, with both well above 5% as of writing. What’s more, they also provide the highest increases of the Big Six, too. That’s not to say that TD stock is low, as you can lock in a yield at 4.19%.

But TD stock and CIBC stock have also been expanding when it comes to offerings and provides the lowest share price if you don’t have much to spend. TFSA investors can pick them up below $100 per share, unlike other Big Six banks. And they offer so much for their customers, including loan options and expanding customer service.

How much you can bring into your TFSA

If TFSA investors want passive income that lasts, then TD stock, BMO stock, and CIBC stock are definitely the three banks I would consider. In fact, let’s look at what a $5,000 investment would get you today from all three banks.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCYTOTAL INVESTMENT
BMO$136.5837$5.72$211.64Quarterly$5,000
TD$92.7054$3.84$207.36Quarterly$5,000
CM$62.1081$3.40$275.40Quarterly$5,000

There you have it. As of writing, you can pick up all three in value territory for a total investment of $15,000 bringing in $694.40 each year.

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 Amy Legate-Wolfe has positions in Canadian Imperial Bank Of Commerce and Toronto-Dominion Bank. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Bank Stocks

Piggy bank with word TFSA for tax-free savings accounts.
Bank Stocks

TFSA Income Stream: 2 Top Dividend Stocks to Own for Decades

By adding these two top dividend stocks from the bank sector to your TFSA now, you can expect to receive…

Read more »

A stock price graph showing declines
Bank Stocks

TD Stock Has Fallen to a Low of $73: Is it Done Dropping?

TD (TSX:TD) is often viewed as a great long-term investment. But given its volatility in recent months, has TD stock…

Read more »

grow money, wealth build
Bank Stocks

This 6.9% Yielding Dividend Stock Remains a Top Choice for Passive Income

High yield dividend stock First National Financial (TSX:FN) remains a good value.

Read more »

calculate and analyze stock
Bank Stocks

CRA: Are You Eligible for the $496 GST/HST Refund in 2024?

Here's how investors can consider reinvesting proceeds from tax credits such as the GST/HST to build long-term wealth.

Read more »

stock market
Bank Stocks

Big Bank Bull Run? 2 Canadian Bank Stocks Overdue for a Rally

Looking to invest in the best Canadian bank stocks? Here are two options that still trade at a discount and…

Read more »

A worker uses a double monitor computer screen in an office.
Bank Stocks

BMO vs. BNS: Which Bank Stock Is a Better Buy?

Let's explore whether Bank of Nova Scotia or Bank of Montreal is a better buy today seeing as they have…

Read more »

View of high rise corporate buildings in the financial district of Toronto, Canada
Bank Stocks

Better Buy: TD Bank Stock vs. BMO

TD Bank (TSX:TD) and Bank of Montreal (TSX:BMO) are the kings of banking value this summer.

Read more »

Bank sign on traditional europe building facade
Bank Stocks

Canadian Bank Stocks: Buy, Sell, or Hold?

Canadian bank stocks are rock-solid investments, but one is a no-brainer buy following the recent interest rate cut.

Read more »