The Smartest Dividend Stocks to Buy With $400 Right Now

If you’re looking for big gains from a small investment, the bank stocks are your best bet — especially with dividend yields at incredible heights.

| More on:
bulb idea thinking

Image source: Getty Images

The market is recovering, yet there are many that remain on edge. And honestly, I’m one of them. For all the growth I want out of my investments, I’ve been burned before — a lot.

This is why I’m looking at companies that are a deal but will very, very likely recover — ones that I can feel confident in buying because they’ve been around for decades, 100 years, even 200 years.

Those, my friends, are bank stocks.

Aren’t bank stocks bad?

Bank stocks in Canada are very different from banks in other countries, especially in the United States. Here, we enjoy an oligopoly of banking institutions. The Big Six banks control 90% of the market. While this might not be great when it comes to finding a great price on loans for consumers, it turns out it’s pretty great for investors.

That’s because these banks are far safer to invest in. Each has been around for decades, and in the case of one bank stock, it’s been around over 200 years! Plus, Canadian banks haven’t gone through a banking crisis since 1837. Yes, that is not a typo. Canadian banks made it through the Great Depression, Great Recession, and more and are still around.

This means you can invest in banking stocks and be fairly darn confident that they’ll perform well. What’s more, you can be sure that they’ll recover and climb past 52-week highs. Why? Because they’ve done it decade after decade.

Think long term

The key here isn’t that you’re looking at bank stocks as a short-term investment. These are not growth stocks. Instead, you want to consider holding them for a decade or more, using the dividend income provided to help fund future investments as well. Do this, and you can guarantee incredible growth in the decades to come.

What you want to look for among these Big Six banks are stocks that are going to do well in that time. Try to find some diversification within these banks that will help fuel your portfolio rather than seeing stocks overlap in investment strategy.

That’s why I would consider investing in Royal Bank of Canada (TSX:RY), Bank of Montreal (TSX:BMO), and Canadian Imperial Bank of Commerce (TSX:CM).

Triple threat

Each of these investments provides Canadians with a solid strategy of growth, expansion, and diversification in and outside of Canada. RBC stock, for one, has seen a lot of growth as Canada’s largest bank in terms of market capitalization. It continues to see growth from wealth and commercial management, allowing it to then take on investments in other countries for more advanced growth.

BMO stock is another great option as it just managed to invest in Bank of the West. I say “just managed” because, after that, the U.S. declared no more large foreign investments. So, now, Canadians can look forward to immense growth in the U.S. — something other banks cannot claim.

As for CIBC stock, it’s the poorest performing of the bank stocks. Yet this is because of a major investment into Canada and the housing market. The Canadian housing market will eventually improve, allowing for incredible long-term gains. You’ll just have to be patient in this case, and a massive 6.58% dividend yield will certainly help.

Bottom line

These bank stocks are the first I would consider for long-term growth, even with just $400. Each of them provide a deal, with shares trading down by double digits in the last year. You can therefore grab higher-than-usual dividend yields. For RBC stock, that’s at 4.57%. CIBC stock’s dividend is at 6.58%. BMO stock’s dividend is at 5.36%! Each is higher than the five-year average. So, consider these bank stocks if you’re looking for a big boost in a bull market and incredibly high dividends while you wait.

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 Amy Legate-Wolfe has positions in Canadian Imperial Bank Of Commerce and Royal Bank Of Canada. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Stocks for Beginners

A golden egg in a nest
Stocks for Beginners

Got $5,000? 5 Stocks to Buy for Lasting Wealth

Got $5,000 to build a long-term compounding stock portfolio? Here are five top Canadian stocks to building lasting lifetime wealth.

Read more »

Dividend Stocks

3 Dividend Stocks to Double Up on Right Now

Some of these dividend stocks will take longer to recover than others, but they'll certainly pay you to stick around.

Read more »

edit Person using calculator next to charts and graphs
Stocks for Beginners

Watching This 1 Key Metric Could Help You Beat the Stock Market 

If you're looking for the best way to beat the TSX 60, look at this key metric and find a…

Read more »

Online shopping
Stocks for Beginners

Is Couche-Tard Stock a Buy?

Couche-Tard stock (TSX:ATD) may be up 11% in the last year, but quarterly results have been shrinking, leaving investors on…

Read more »

Happy Retirement” on a road
Stocks for Beginners

2 TSX Stocks That Could Help Set You Up for Life

Looking for some of the best TSX stocks to add to your portfolio? Here's a duo to consider that can…

Read more »

A close up image of Canadian $20 Dollar bills
Stocks for Beginners

Low-Risk Investors: Why IAG Stock Could Be Your Best Bet Yet!

IAG (TSX:IAG) stock operates in a stable sector, with a strong dividend and returns. And there are even more reasons…

Read more »

Dollar symbol and Canadian flag on keyboard
Stocks for Beginners

3 Canadian Stocks Tailor-Made for Beginning Investors in 2024

There are some great options to buy now for beginning investors. Here are three stocks to buy today and hold…

Read more »

grow dividends
Stocks for Beginners

Check Out This Soaring Stock up 486% in 5 Years — With More Gains Likely to Come

Shares of this stock are soaring, up 486% in the last five years. But this small-cap stock has a lot…

Read more »