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.


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

Dividend Stocks

TFSA: 3 Value Stocks to Buy in April

The March dip is a synopsis of the mild recession banks anticipate as high interest rates trickles down. It is…

Read more »

edit Colleagues chat over ketchup chips
Tech Stocks

2 Easy TSX Stocks for Beginners in April 2023

You don’t need to think twice about loading up on these two Canadian stocks in April.

Read more »

edit Taxes CRA
Stocks for Beginners

How I’m Using My RRSP This Tax Season

Don't dismiss what you can make from your RRSP this year and every year, especially if you invest in a…

Read more »

worry concern
Bank Stocks

Should You Be Worried About CIBC Stock?

CIBC stock fell more than 10% in March, as the U.S. bank collapse sounded an alarm. Should you be worried…

Read more »

stock research, analyze data
Energy Stocks

Better Buy in April 2023: Bank Stocks or Energy Stocks?

Bank stocks and energy stocks are some of the most sought-after assets, but which is the better buy heading into…

Read more »

A bull outlined against a field
Bank Stocks

Want to Catch the Next Bull Market? Buy This Stock While It’s Still Low

You might think that buying stocks like Royal Bank of Canada before a new bull market begins is risky, but…

Read more »

Hour glass and calendar concept for time slipping away for important appointment date, schedule and deadline
Bank Stocks

Passive Income: I’m on Track to Hit $2,000/Year

I am collecting nearly $2,000 per year in passive income via dividend stocks like the Toronto-Dominion Bank, as well as…

Read more »

edit Close-up Of A Piggybank With Eyeglasses And Calculator On Desk
Bank Stocks

Royal Bank Stock Could Fall Even More: When it Does, Buy it!

Royal Bank (TSX:RY) stock may trade in value territory, but hold off! There is likely more of a drop to…

Read more »