Are you looking for tax-free TFSA income? If so, you might want to consider investing in Canadian bank stocks. Canadian banks are some of the oldest and most respected in the world. Several of them are over a hundred years old, and have dividend track records almost as long as that. Canadian banks are well known for their stability. In 150 years, they have not encountered a serious financial crisis requiring bailouts – U.S. banks have faced three in the same period. In this article, I’ll explore three Canadian bank stocks you can consider buying for tax-free TFSA income.
Bank of Montreal
Bank of Montreal (TSX:BMO) is Canada’s oldest bank. Founded in 1817, it’s over 200 years old! Being as old as it is, BMO might give the appearance of being a stodgy old institution that’s not doing much. Nothing could be further from the truth. BMO has actually been one of the faster-growing Canadian banks in recent years. Over the last five years, it has grown its revenue by 9.3% per year, and its earnings by 20% per year. Those are much faster growth rates than what you see in the Canadian banking sector as a whole.
Not only that, but BMO’s growth could ramp up even further. Currently, BMO is in the process of buying out Bank of the West, a major U.S. bank based in California. The deal will add over $100 billion in assets to BMO’s balance sheet if it closes. Overall, the tie-up has a lot of potential.
The Toronto-Dominion Bank (TSX:TD) is a bank that I have covered extensively here on the Motley Fool. It’s not as old as BMO, but its history is very distinguished. Its main claim to fame is its massive U.S. retail banking business. TD owns the 9th biggest retail bank chain in the United States. It’s mainly active on the East Coast. Included in TD’s U.S. retail business is a large stake in Charles Schwab, one of the biggest brokers in America. In its most recent quarter, TD put out incredible numbers, growing its earnings by 76%. In the year ahead, it is expected to close deals to buy out the U.S. banks First Horizon and Cowen, which will take its earnings higher still. I’m pretty optimistic about TD Bank stock in the year ahead.
The Royal Bank of Canada (TSX:RY) is another big Canadian bank. It has operations all across the country. This cross-border bank also has operations in the U.S., where it is mainly known for investment banking and wealth management. Much like BMO, Royal Bank has a very long history. It was founded 150 years ago, and has paid dividends for more than 100 consecutive years. It has been an impressive run. Much like the other two banks I mentioned, Royal Bank has a big deal in the works. It’s going to be buying HSBC Canada from HSBC. The deal will increase RY’s presence in the Canadian market. In general, I like to see Canadian banks expanding into foreign markets, because the growth potential within Canada is limited. Still, RY is a pretty dependable Canadian bank.