Looking for a way to get more out of your investments with less hassle? How about considering some TSX bank stocks that are known for delivering attractive and reliable dividends for decades. Such reliable dividend stocks from the Canadian banking sector can not only provide you with a steady source of passive income but also offer the potential for capital appreciation in the long run.
In addition, most TSX bank stocks have underperformed the broader market in the last couple of years due mainly to the challenging macroeconomic environment, making them look undervalued to buy now. In this article, I’ll highlight two top bank stocks on the Toronto Stock Exchange that have attractive dividend yields of up to 7% and strong growth prospects.
Laurentian Bank of Canada stock
While Laurentian Bank of Canada (TSX: LB) is not among Canada’s five largest banks, it’s still a reputable and well-established financial institution with over 175 years of track record in its domain. This Montréal-headquartered bank currently has a market cap of $1.2 billion as its stock trades at $27.54 per share after rising by around 7% in the last six months. At this market price, LB stock offers an impressive 7% annualized dividend yield and distributes its dividend payouts every quarter.
In the 12 months ended in January 2024, Laurentian Bank’s adjusted earnings slipped by 15.7% YoY (year over year) to nearly $4.29 per share as lower loan volumes continued to hurt its interest income. On the positive side, the bank reported an improvement in its net interest margin last quarter as stable interest rates strengthened its product margins.
Laurentian Bank’s provisions for credit losses have increased in recent quarters as the ongoing economic uncertainties hurt the credit quality of its customers. Nonetheless, its strong liquidity levels and robust capital position continue to help it navigate this period of economic uncertainty. As potential interest rate cuts in the near term increase the demand for its financial services, Laurentian Bank’s financial growth trends could improve significantly going forward, which should help its share prices rise.
Scotiabank stock
Bank of Nova Scotia (TSX: BNS) or Scotiabank is another fundamentally strong TSX bank stock you can bet on right now to earn passive income from its reliable dividends. Based on its market cap of $80.8 billion, Scotiabank is currently the fourth-largest Canadian bank, as its stock trades at $65.73 per share after rising 11% in the last six months. Just like Laurentian Bank, BNS stock also distributes its dividends on a monthly basis and has an attractive annualized dividend yield of 6.5% at the current market price.
One of the main factors that sets Scotiabank apart from most other financial institutions is its diversified business model with a strong presence in high-growth international markets. Its consistent focus on diversification is the main reason why Scotiabank’s total revenues went up 4.5% YoY to $32.8 billion in the four quarters ended January 2024.
Although higher provisions for credit losses have affected the bank’s profitability of late, expected improvements in the economic outlook in the coming years should boost its earnings growth trend. Moreover, Scotiabank’s consistent focus on margin expansion, disciplined expense management, and revenue growth across core segments brightens its long-term growth outlook.
