After about a month and a half of steady decline, banking stocks started going up again in March and have carried that momentum into April. Almost all bank stocks have gone up, but not all may be worth considering for April.
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Bank of Nova Scotia
The Bank of Nova Scotia (TSX: BNS) is the highest-yielding bank stock in Canada right now, offering a juicy 6% yield. Part of the reason behind this high yield is the 26% discount the stock is currently offering. BNS is even trading below its pre-pandemic peak (about 8%). The stock is also modestly undervalued compared to the rest of the sector.
Dividends are reason enough to consider this bank stock, especially if you consider its healthy payout ratio and dividend growth streak, which is similar to the rest of the banking sector. It may also offer decent capital appreciation in the long run. Though this notion is not endorsed by the performance in the last five years.
National Bank of Canada
If your investment goal leans more towards capital appreciation than dividends, the National Bank of Canada (TSX: NA) might be a better fit for your portfolio. It’s also a decent buy in April because it’s still modestly discounted, as well as riding the current recovery momentum upward at a decent pace.
The dividend yield is still around 4%, but it might not remain at that attractive level for long, assuming the stock keeps going upward. Even with the slumps and fluctuations it has endured in the past 12 months, the stock has risen over 64% in the last five years. The overall returns (adding in the dividends) are even more substantial.
Considering its history and lightweight (smallest in market cap among the Big Six banks), the stock may experience more growth compared to its peers if the bullish phase lasts for a few months.
Royal Bank of Canada
Even though all Canadian banks can be considered blue-chip stocks, the title fits none of them as well as it does the largest bank in Canada (by market cap) – the Royal Bank of Canada. It’s not only the largest bank stock in Canada but the largest publicly traded entity in the country and has retained this position for quite a while.
This leadership position is one of many reasons to consider this stock for an April 2023 buy. The bank offers a healthy combination of dividend yield (4%), valuation, and capital appreciation potential, especially if you hold it long term. In the last 10 years, the bank returned 217% to its investors through capital appreciation and dividends.
Foolish takeaway
These three banking stocks can give your portfolio a significant boost, especially if you can grab them in the early stages of what may prove to be a relatively long-term bullish phase. You don’t necessarily have to cash out your gains at the end of this trend but intstead may consider holding them long-term for the capital growth and dividend potential.
