Canadian bank stocks have stood as some of the best investments for Canadian investors for centuries. The Big Six banks, in particular, have delivered stellar returns to their shareholders through capital gains and dividends. Many of the big banks have been paying investors their shareholder dividends for over a century and a half.
Historically, around 66% of long-term returns from stock market investing come through shareholder dividends, as opposed to capital gains. For any investor planning for successful wealth-building, a significant presence of Canadian bank stocks is a staple in their long-term holdings. Canadian banks have paid safe dividends for a long time, and several of them have increased payouts over the decades.
If you want to establish positions in the top bank stocks, these two are my top picks from Canadian bank stocks to consider for your self-directed portfolio.
RBC stock
Royal Bank of Canada (TSX: RY) is the largest among the Canadian Big Six bank stocks. Headquartered in Toronto, it boasts a $189.99 billion market capitalization, which also makes it the biggest equity security on the TSX in terms of market cap. It is clear that RBC stock is not giving up its position as the largest of the Big Six, providing investors with safe and steady dividends without fail since 1864.
The bank stock has seen several recessions, economic depressions, two World Wars, and even a pandemic. And yet, it has come out stronger on the other side of all these macro events.
With its recent purchase of HSBC, RBC stock has beaten its closest peers in the Canadian banking sector and cemented its place at the top. As of this writing, Royal Bank of Canada stock trades for $135.33 per share, boasting a 4.08% dividend yield.
CIBC stock
Canadian Imperial Bank of Commerce (TSX: CM) is another Big Six bank headquartered in Toronto. With a market capitalization of $59.41 billion, it does not come close to RBC stock in market cap. While higher interest rates should technically be a good thing for Canadian banks, rising interest rates throughout 2023 became headwinds due to slowing economic activity.
While most of the banking sector suffered significant share price declines, CIBC rebounded with strength in the latter part of 2023. The stock returned 22% as the year ended, making it the top performer among its peers in the Big Six.
CIBC stock also boasts a 155-year dividend track record. As of this writing, the Canadian Imperial Bank of Commerce stock trades for $63.74 per share, boasting a 5.65% dividend yield that is too attractive to ignore right now.
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Foolish takeaway
When it comes to investing in Canadian bank stocks, you can never go wrong with the Big Six. All six boast extensive track records for delivering wealth growth through capital gains and dividends in the long run. As of this writing, RBC stock and CIBC stock have gained by 4.08% and 5.65% since their October 2023 lows, respectively.
At current levels, these two bank stocks are attractively priced to capture long-term capital gains while locking in higher-than-usual-yielding dividends in your self-directed portfolio.
