The broader stock market is in a bit of a slump this August. Indeed, the autumn season isn’t exactly the best time to be an investor. Before you ditch stocks before September rolls around, though, I’d encourage Canadian investors to consider the broader basket of value plays. I still see a lot of value in many Canadian industries.
After a turbulent past couple of years, the Canadian banks seem like intriguing buys right here, as the headwinds begin to show signs of abating. Of course, it seems like a recession will be hard to steer clear of, with interest rates continuing to weigh heavily on sentiment. Still, the big banks can do relatively well in a sort of higher-for-longer climate.
Big banks take a big hit
Royal Bank of Canada (TSX:RY) stock is one of the best dividend stocks, not only in Canada but in North America. At writing, the top Canadian bank is in a bit of a rut alongside the Big Six. As a recession touches down, earnings could take a step or two in reverse.
Regardless, I do think there’s already quite a bit of recession-related risk that’s already taken a toll on the stock. Though I do believe a recession could hit in the next 18 months in Canada, I’m not so sure shares of Royal Bank of Canada will sink considerably from these levels.
At the time of writing, Royal Bank stock trades at 12 times trailing price-to-earnings alongside a very nice 4.45% dividend yield. The payout is safe and likely to keep growing year after year. Currently, shares are sitting down just shy of 18% from the highs not seen since the start of last year.
While I’m not against picking up a few shares of RY on the dip, I do think there’s better value to be had with some of Royal’s peers. Indeed, Royal Bank is a dividend titan that you can expect to pay a premium for. As it stands, I do think new investors can do better from a risk/reward standpoint from one of Royal’s cheaper younger brothers.
Bank of Nova Scotia stock: A better dividend titan than Royal Bank stock?
At this juncture, Bank of Nova Scotia (TSX:BNS), or Scotiabank as it’s often referred to, trades at a greater discount (9.3 times trailing price-to-earnings), with a massive 6.8% dividend yield. The stock has already shed more than 33% of its value and is currently hovering at multi-year lows at $62 and change per share.
The Canadian bank has a strong international presence, and amid turbulent macro conditions, it’s this geographic diversification that’s been viewed as a negative. If you’re an investor who’s in it for the long run, though, I do think BNS stock looks like the best bank of the batch. The bank’s exposure to the Latin American region could be a source of greater growth through the next decade.
The Foolish takeaway for dividend hunters
Royal Bank stock may deserve a premium to the Big Six pack. However, I believe younger investors can stretch their investment dollars farther in a battered bank and dividend titan like Scotiabank. The lower price-to-earnings multiple and nearly 7% yield in BNS stock make it just too cheap to pass up if you’re seeking next-level value in a rocky stock market.
