Contrary to their long-term performance, several top Canadian banks have been underperformers in recent years. The state of the global economy and the domestic market ever since the pandemic came along has made it difficult for any industry to perform as expected.
As tempting as it might seem, you should not be too eager to throw in the towel on the top Canadian bank stocks.
Bank stocks are not investments that you can rely on as get-rich-quick assets. Rather, they are blue-chip assets you can count on to appreciate slowly but surely. At current levels, bank stocks trade at incredibly cheap prices. While it is impossible to predict when share prices will rally again, it is only a matter of when, not if.
For the long-term investor, even a further downturn might not be bad news. When share prices decline, dividend yields become inflated. Despite increased provisions for loan losses, many banks appear well positioned to deliver dividend hikes. If nothing else, reliable dividend yields are something you can bank on when it comes to the top Canadian stocks in the industry.
All things considered, here are two Canadian bank stocks trading at discounted rates that you can add to your portfolio with a relatively lower degree of capital risk.
Toronto-Dominion Bank
Toronto-Dominion Bank (TSX:TD) is a $147.43 billion market capitalization Canadian multinational banking and financial services company. One of the Big Six Canadian banks, it does not need much introduction for the seasoned investor.
For many, TD Bank stands out as the top pick. Why? Because the bank offers investors significant exposure to the banking sector across the border. After several regional banks went under in America, TD Bank might be a more favourable place to allocate money due to its well-established presence there.
Well-capitalized TD Bank has the capacity to acquire at least one regional bank. Due to the availability of heavily discounted bargains in the market, it can capitalize on its purchasing power.
While it is likely not going to do it because of a recession moving in on the Canadian market, I would not shrug off the possibility just yet. Such a move can make it an even greater force to be reckoned with.
As of this writing, TD Bank stock trades for $81.42 per share, paying its shareholders at a juicy 4.72% dividend yield.
National Bank of Canada
National Bank of Canada (TSX:NA), with its $30.24 billion market capitalization, is the smallest of the Canadian Big Six banks. However, the Montreal-based financial institution has a solid presence in Quebec, its home province. The bank’s third-quarter earnings for fiscal 2023 saw it report an adjusted net income of $839 million, up by 2% from the same period last year.
The bank’s personal and commercial banking segment saw its net income rise from $319 million in Q3 2022 to $328 million.
Empowered by enhanced revenue growth despite headwinds from setting higher provisions for loan losses and non-interest expenses. While the sharp decline in global market revenues saw its financial markets segment report a 27% downturn in its net income, its wealth management segment grew by 5% in the period.
As of this writing, National Bank of Canada stock trades for $89.64 per share, boasting a juicy 4.56% dividend yield.
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Foolish takeaway
Boasting higher-than-usual dividends at massively discounted share prices, Canadian bank stocks can be attractive additions for investors with a long investment horizon. Share prices might take their time to appreciate and deliver capital gains. That said, the higher-yielding dividends can keep the returns coming while you wait for that to happen.
To this end, TD Bank stock and National Bank of Canada stock can be great additions to your self-directed investment portfolio.
