In the world of stock investing, bank stocks have often been the go-to choice for many legendary and successful investors. This is primarily because banks, especially the established ones, tend to offer a good blend of stability, consistent dividends, and the potential for capital appreciation. Even as the Canadian stock market continues to go through a rollercoaster in 2023, Canadian bank stocks, with their strong financial bases, offer a great opportunity today for investors who want to create a reliable source of dividend income for the long term.
In fact, the recent market selloff has also made some fundamentally strong bank stocks look undervalued. In this article, I’ll highlight two of such amazing, dividend-paying bank stocks you can buy on the TSX today.
TD Bank stock
Toronto-Dominion Bank (TSX:TD) is my first bank stock pick you can consider in October 2023. TD stock has slid by 10% on a year-to-date basis due partly to the broader market selloff to currently trade at $78.55 per share with a market cap of $142 billion. At this market price, the stock offers a 4.9% annualized dividend yield and distributes its dividend payouts every quarter.
Besides the broader market selloff, another factor hurting TD’s share price movement in 2023 could be a recent weakness in its earnings growth trend. In the last two reported quarters combined, while its total revenue has jumped by nearly 13% YoY (year over year) to $25.6 billion, growing provisions for credit losses amid high interest rates have led to a 4.4% YoY decline in its adjusted earnings to $3.93 per share.
However, when buying a stock for the long term, you may want to pay attention to its long-term growth outlook more than its short-term financial growth trends. And despite the recent decline in its earnings, TD’s continued focus on U.S. market expansion and investing in new technological solutions to boost growth potential brightens its long-term growth outlook. Considering that, TD stock could be worth considering now.
Bank of Nova Scotia stock
When we talk about large Canadian banks’ growing presence in the international market, Bank of Nova Scotia (TSX:BNS) is difficult to ignore. Besides its home market, Scotiabank has expanded its presence in several international markets, including the United States, Mexico, Chile, and Peru, over the last several years.
BNS stock has lost nearly 15% of its value on a year-to-date basis to currently trade at $56.66 per share, trimming its market cap to $68.3 billion. These recent declines in its share prices, however, have taken its annualized dividend yield higher to a more attractive level of 7.5%.
In the first three quarters (ended in July) of its fiscal year 2023, Scotiabank’s total revenue has grown positively by 1% YoY to $24 billion. In contrast, its adjusted earnings during the same period have dived by nearly 18% YoY to $5.28 per share due mainly to higher provisions for credit losses, like in the case of TD Bank.
Although the ongoing macroeconomic challenges might continue to trim Scotiabank’s profits in the near term, its solid liquidity position, strategy of disciplined capital allocation, and strong presence in the wealth management segment are likely to help its financials recover fast in the coming years, making this top Canadian bank stock attractive to buy on the dip today.
