2 Incredibly Cheap Bank Stocks for Passive Income Following SVB Fallout

Canadian Western Bank (TSX:CWB) is one of many great bank stocks that passive-income investors should watch after SVB’s fall.

| More on:
Bank sign on traditional europe building facade

Image source: Getty Images

There’s a lot of anxiety out there, with ripples continuing to work their way through the banking sector. Rapid rate hikes finally caused something to “break,” and with that could come a slower pace of hikes moving forward. Indeed, the Bank of Canada seems to be a bit further ahead than the U.S. Federal Reserve.

Whether the U.S. continues raising rates as Canada holds off remains to be seen. Regardless, Canadian investors should focus less on rates, inflation, the macro picture, and economic variables and more on uncovering great companies at decent prices.

As a stock falls in price, its dividend yield tends to creep higher. Assuming a dividend is well covered, investors who buy such income stocks on the dip can get a lot more than they bargained for. In this piece, we’ll look at two bank stocks that should be on the radar of passive-income investors.

TD Bank

TD Bank (TSX:TD) is one of Canada’s most impressive banks. It managed through the Great Financial Crisis and the pandemic recession of 2020. And it’s likely to continue to hold its own as the 2023 recession rears its ugly head. Indeed, TD Bank stock took one on the chin in recent months. The recent wave of bank selling has not spared that top Canadian bank.

With a strong presence in the U.S., it’s not a mystery as to why TD stock has been feeling the heat a bit more than some of its peers of late. In any case, TD Bank doesn’t seem as at risk as the regionals (or even mega caps) south of the border.

Even if TD’s First Horizons deal is at risk, I continue to view TD as a growth-centric bank.

If anything, rapidly declining valuations in the U.S. market could allow TD to get a better bang for its buck come its next big deal down south. At 9.59 times trailing price to earnings, TD sports a 4.8% yield. I think the yield is worth biting on if you seek safe passive income.

Canadian Western Bank

Canadian Western Bank (TSX:CWB) is a regional Canadian bank that also took one to the chin, now off over 18% in around a month. Indeed, regionals have been scarier to own than the big banks due to their greater exposure to certain sources of failure. After the latest spill, CWB stock goes for 6.9 times trailing price to earnings alongside a 5.3% yield.

Sure, the regional bank has a lot of Albertan exposure. And if oil sinks considerably, the stock could be a choppy mover. In any case, it’s quite absurd that Canadian Western Bank would plunge due to the fall of a bank in Silicon Valley.

Indeed, Silicon Valley bank found itself in the blast zone of the tech sector’s painful 2022 blow-up. Canadian Western Bank is far from that blast zone, making the name a tempting stock for passive-income investors to watch.

Foolish takeaway for passive-income investors

The two bank stocks in this piece look undervalued and oversold. With bountiful dividend yields and a safe distance away from the SVB fall, I remain a raging bull on both Canadian banks.

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 Joey Frenette has positions in Toronto-Dominion Bank. The Motley Fool recommends Canadian Western Bank. The Motley Fool has a disclosure policy.

More on Bank Stocks

Question marks in a pile
Bank Stocks

Should You Buy Canadian Western Bank for its 4.8% Dividend Yield?

Down 35% from all-time highs, Canadian Western Bank offers a tasty dividend yield of 4.8%. Is the TSX bank stock…

Read more »

analyze data
Bank Stocks

The Average Canadian Stock Investor Owns This 1 Stock: Do You?

This Canadian stock has about 49% ownership by the public, and with growth and dividends to consider, it's a top…

Read more »

falling red arrow and lifting
Stocks for Beginners

1 Dividend Stock Down 18% to Buy Right Now

CIBC (TSX:CM) is a strong dividend stock investors should certainly consider not just for passive income, but future growth as…

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Tech Stocks

Forget TD Stock: 2 Tech Stocks to Buy Instead

TD remains a solid income stock but two outperforming tech stocks are better buys for their strong growth and upside…

Read more »

Question marks in a pile
Bank Stocks

Where Will Royal Bank of Canada Stock Be in 5 Years?

Royal Bank's continued focus on a strong capital position plus its acquisition of HSBC will likely ensure prosperous times ahead.

Read more »

Payday ringed on a calendar
Bank Stocks

How to Build a Bulletproof Monthly Passive-Income Portfolio With Just $10,000 and TD Stock

TD (TSX:TD) stock has been a poor performer over the last few years, but could be a big passive-income winner…

Read more »

Man considering whether to sell or buy
Bank Stocks

Is RBC Stock a Buy, Sell, or Hold?

Shares of Royal Bank of Canada have delivered game-changing returns to shareholders in the last two decades. Is RBC stock…

Read more »

Dice engraved with the words buy and sell
Bank Stocks

Is Scotiabank (BNS) Stock a Buy, Sell, or Hold?

Let's dive into whether the Bank of Nova Scotia (TSX:BNS) remains a solid buy or if it's more of a…

Read more »