My 2 Favourite Canadian Bank Stocks to Buy Before 2024

Bank of Nova Scotia (TSX:BNS) stock and another top bank could offer terrific value for dividend hunters.

| More on:
Bank sign on traditional europe building facade

Image source: Getty Images

The Canadian banks got a nice boost on Wednesday, as markets rocketed on the back of a dovish tilt from the U.S. Federal Reserve. Though lower interest rates may not be, in itself, the best thing for the big banks, I think that the odds of a soft landing have increased drastically. In any case, a lack of recession (or a short-lived one) couldn’t be more positive for the big banks, many of which have braced for a downturn for numerous quarters now.

Undoubtedly, it feels like a slowdown of sorts has already arrived! In any case, the banks have been in recovery mode since the market bottomed back in October. And I think the banking scene is full of value for those looking to grab a nice yield for the long haul.

Lower rates, lower inflation ahead?

Many investors have likely been on edge over elevated rates and what remains of high inflation. With inflation retreating, it should come as no shocker that the Federal Reserve is open to a trio of rate cuts in the new year. The economy has been on wobbly legs, after all. And as inflation fades away, rate cuts may just be able to put the economy on some stronger footing.

Without further ado, let’s look at two banks that are at or around the top of my watchlist as rate fears begin to ease.

TD Bank

TD Bank (TSX:TD) was a scary stock to own earlier this year when regional banks in the states were under serious pressure. At the time, TD was in the running to acquire one of the regional banks in First Horizons — a deal that was ultimately terminated in the heat of the regional banking chaos. This provided a bit of relief to shares of TD initially.

In the following months, though, TD stock lagged pretty badly. As it stands today, the bank is likely overcapitalized after not following through on any major acquisitions, making the bank a “steady ship” that can sail through a rough patch without toppling over.

Indeed, I’d like to see TD pursue a regional deal down south in the new year. But I don’t think we’ll get a deal. That is unless the banking sector is in for an unpleasant surprise.

With a 5.03% dividend yield and recent hiring in the investment banking side, I view TD stock as a bargain that can fare well, regardless of what rates do next year.

Bank of Nova Scotia

Bank of Nova Scotia (TSX:BNS) is a dirt-cheap Canadian bank that may be most appealing to the deep-value crowd and the passive-income seekers. Sure, the bank has been under a storm of headwinds, but who can resist a dividend yield close to the 7% mark? Indeed, Bank of Nova Scotia stock also has its international exposure (think the Latin American business), making it a great way to diverify from a geographical perspective.

At writing, the stock goes for 10.54 times trailing price to earnings. Underwhelming quarters have acted as a drag on the stock. But with low expectations, I believe, comes a greater chance of impressing. Sure, it’s hard to imagine the $75.4 billion bank impressing in today’s rocky environment. Regardless, I think a bet on BNS stock will pay off in five years’ time.

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 Joey Frenette has positions in Toronto-Dominion Bank. The Motley Fool recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy.

More on Bank Stocks

TIMER SAYING TIME FOR ACTION
Bank Stocks

3 Reasons to Buy TD Bank Stock Like There’s No Tomorrow

Looking for a great bank stock to add to your portfolio? Here are three reasons why TD (TSX:TD) may be…

Read more »

Stocks for Beginners

Value Investors: Are You Buying and Holding Forever? Think Again

Value stocks are great, but if you don't have a goal in mind that stock can quickly turn from value…

Read more »

question marks written reminders tickets
Bank Stocks

Is Bank of America Stock a Good Buy Right Now?

Down 40% from all-time highs, Bank of America stock is very cheap and may outpace the broader markets this year.

Read more »

Bad apple with good apples
Bank Stocks

A U.S. Bank Stock Just Tanked: Is Canada Next?

A U.S. bank stock just plunged from downgrades, so how are Canadian bank stocks faring, and could they be next…

Read more »

Man holding magnifying glass over a document
Bank Stocks

Bank Stocks Are a Deep Value Today: 2 Top Choices to Watch

TD Bank (TSX:TD) and another stock are intriguing bank stocks with deep value propositions for long-term investors.

Read more »

protect, safe, trust
Dividend Stocks

Want Super-Safe Dividend Income in 2024? Invest in the Following 2 Ultra-High-Yield Stocks

High-return investments are usually high risk but two generous dividend payers are exceptions if you want super-safe dividend income in…

Read more »

Man data analyze
Bank Stocks

Is it Now Too Late to Buy Bank of Montreal Stock?

Bank of Montreal is up 20% from the 2023 low. Are more gains on the way?

Read more »

woman analyze data
Bank Stocks

RRSP Investors: Is Royal Bank of Canada Stock a Buy Now?

Royal Bank is up 20% from the 2023 low. Are more gains on the way?

Read more »