The Canadian bank stocks seem to be a drag on portfolio performance in recent years, with the latest wave of headwinds putting an end to the brief relief rally for the banking scene. Undoubtedly, young investors in search of a quick gain should look elsewhere, as the bank stocks are probably not heading higher anytime soon. Despite being one of the more untimely bets in the Canadian stock markets, I continue to view them as historically cheap and worthy of a bet for those with time horizons longer than six or seven years.
Indeed, short-term investors and traders need not apply to the Canadian banks. If you’re a dividend investor who wouldn’t mind getting paid to wait, however, it’s tough to count the big bank stocks out of the game right here as they look to tackle what could be the last wave of hurricane-like conditions weighing on their ability to grow.
Will 2024 see relief for the ailing bank stocks? Only time will tell. After the recent run off last year’s lows, it’s hard to tell just how much of the rate-cut hopes are baked in at current levels. For those who are committed to owning the names long term, though, it really doesn’t matter what bank stocks do this year as they face some rough quarters.
TD Bank stock: A 5% dividend yield worth grabbing
At this juncture, I’m a pretty big fan of TD Bank (TSX:TD), with shares recently falling below the $80 per share mark. At this pace, TD stock could find itself right back to 52-week lows in a matter of weeks. Though TD and the rest of the group have little in the way of things to look forward to, I believe the selling is starting to become overdone again.
The stock yields more than 5%, which is bountiful as far as TD Bank stock is concerned. With the bank recently winning “most valuable brand” in Canada (despite not being the largest firm in the country with its $142.9 billion market cap), investors shouldn’t sleep on the power of the retail banking behemoth while it’s down and out.
At 14.25 times trailing price to earnings, shares seem more or less fairly valued. Either way, I think the post-slowdown economy could be most kind to the big Canadian bank, with its robust presence on both sides of the border (Canada and the U.S.). In my books, it’s still a premier bank stock — just one that’s encountered rougher waters and tougher crowds.
National Bank of Canada: An underdog that’s been sprinting fast!
I view National Bank of Canada (TSX:NA) as a lesser-loved bank that’s been sprinting a tad faster than many of its peers in the Canadian banking scene. For investors, I think NA stock may be worthy of a premium to its much larger rivals as it continues to gain ground in its markets of interest. At $101 and change per share, National Bank of Canada stock still looks cheap, even with new all-time highs in sight.
Though National Bank faces a somewhat smoother ride than its peers, I’d look to the price-to-earnings multiple (currently at just 10.86) as a primary reason to prefer the name over its peers. The 4.16% dividend yield isn’t the richest of the group. But it is safe, sound, and ready to grow, perhaps at a rate well above the average.