Investing in Canada’s big banks is always a great option for long-term investors. In short, the banks offer a mature business model, stable growth prospects, a juicy dividend, and some defensive appeal. But despite that appeal, some investors question whether those top TSX bank stocks really belong in a portfolio right now.
Here’s a look at some of those top TSX bank stocks, and whether it’s a good time to invest.
But first, a quick reminder
No investment is without risk, and that includes Canada’s big banks. The recent bout of market volatility stemming from the failure of a few U.S.-based banks draws few, if any, parallels to Canada’s big banks.
Canada’s banks are highly regulated and far more conservative than their U.S.-based peers. In fact, while the U.S. financial system appears to undergo a crisis nearly every decade, Canada’s banks haven’t seen a similar crisis in nearly a century.
Oh, and let’s not forget that once that volatility passes and markets begin to show some growth again (which they will), Canada’s big banks always emerge stronger.
A top TSX bank stock with a growing presence in the U.S.
Toronto-Dominion Bank (TSX:TD) is a top TSX bank stock with massive long-term potential. TD is the second-largest lender in Canada and enjoys a growing presence in the U.S. market.
In fact, it was in the years following the Great Recession when TD acquired several smaller banks along the east coast and stitched them together into a single network. Today, that U.S. branch network stretches from Maine to Florida across over 1,100 branches.
And that number is set to grow again.
Last year, TD announced it was acquiring Memphis-based First Horizon in a whopping US$13.4 billion deal. Upon completion, the deal will add over 400 branches and 1.1 million customers into TD’s realm. The deal will also catapault TD into position as the sixth-largest lender in the U.S..
The deal is expected to wrap up later this year.
In addition to the stellar growth potential, TD also offers a juicy dividend. As of the time of writing, the bank offers a juicy yield of 4.75%, making it one of the better-paying options on the market. It’s also worth noting that TD has an established precedent of providing annual bumps to that dividend.
If TD is one of the top TSX bank stocks to buy, why should investors buy now?
As of the time of writing, TD has an impressive P/E of just 8.3. The stock is also trading down over 20% over the trailing 12-month period.
In short, for long-term investors, it’s a great time to consider adding TD to your well-diversified portfolio.
An unlikely candidate for massive growth and income prospects
Canadian Imperial Bank of Commerce (TSX:CM) represents another superb option among the top TSX bank stocks to consider. CIBC is not the largest or most well-known of the big banks. CIBC is also not on the precipice of completing a major acquisition like TD.
So then, what makes CIBC one of the top TSX bank stocks to buy right now?9l
CIBC has a larger mortgage book than its big-bank peers. As interest rates rise, so too does the cost of carrying a mortgage. This had led many to distance themselves from CIBC’s stock.
And as of the time of writing, the stock has dipped a whopping 28%. This not only makes the stock appealing to value-seeking investors, but it has also pushed CIBC’s dividend yield up. That yield currently works out to a juicy 5.92%, making it the second-highest among its big-bank peers.
Prospective investors should also take note that CIBC underwent a stock split last year. Keep in mind that while stock splits do not create value, they do lower the cost of entry for investors.
Final thoughts
Both TD and CIBC are stellar long-term investment options that would do well as part of any well-diversified portfolio. What prospective investors should take into consideration is that both stocks are long-term holdings.
This is particularly true when considering the current volatility we’re seeing across the market right now. In short, buy them now for a discount, enjoy that juicy dividend, and let them grow for a decade or more.
