Bargain Alert: I’ve Been Buying Dips in These Canadian Bank Stocks

Canadian bank stocks can be a great investment for dividends and returns, but these are by far my favourite for a share dip.

| More on:
warning or alert

Image source: Getty Images

Canadian bank stocks continue to be some of the best places for Canadians to park their cash. But that doesn’t mean it’s every single Canadian bank. As we’ve seen, some of them have had a harder time making a comeback from this downturn compared to others. Which is why today I’m going to focus on two Canadian bank stocks that deserve a buy.

So let’s get into why if you’re looking at buying the dip in Canadian bank stocks, I would consider Royal Bank of Canada (TSX:RY) and Canadian Imperial Bank of Commerce (TSX:CM).

RBC stock

First we have RBC stock, Canada’s largest stock by market capitalization. The bank has recently climbed to all-time highs nearing $150 per share. However, should there be a dip in share price, it could certainly be a great place to park your cash.

Let’s start with earnings. RBC reported net income of $4 billion for the quarter, representing a 7% increase year over year (YoY). This growth indicates robust operational efficiency and profitability. Adjusted net income stood at $4.2 billion, up 11% YoY, showcasing even stronger underlying performance when excluding specific items.

Furthermore, diluted EPS increased by 5% to $2.74, while the adjusted diluted EPS rose by 9% to $2.92. The consistent growth in EPS reflects effective management and a strong return on shareholder investments. Plus, RBC maintains a CET1 ratio of 12.8%, which is above regulatory requirements, ensuring that the bank is well-capitalized to absorb potential losses and take advantage of growth opportunities.

Then there’s the growth opportunities. The recent acquisition of HSBC Bank Canada is a significant strategic move, adding considerable assets, customers, and market presence. Although the acquisition brought some initial costs and increased provisions for credit losses (PCL), the long-term benefits include expanded market share and enhanced revenue streams.

Finally, RBC stock increased its dividend by 3% during the quarter, as well as announced the intention to repurchase up to 30 million common shares. This reflects confidence in the bank’s future prospects and a strategic effort to enhance shareholder value by reducing the number of outstanding shares, which can increase EPS and share price over time. All in all, it’s a strong Canadian bank to buy on the dip.

CIBC stock

Perhaps a less obvious choice is CIBC stock. While not at all-time highs, CIBC stock has been climbing and offers a high 5.32% dividend yield as of writing as well. As it continues to climb, it could certainly be a strong investment to buy on the dip.

So again let’s look at the company’s earnings growth to see why it looks like a good buy. CIBC reported a year-over-year (YoY) revenue increase of 8%, reaching $6.2 billion in Q2 2024. This growth indicates strong operational performance and the ability to generate higher income despite challenging market conditions. 

What’s more, it reported net income rose by 4% YoY to $1.7 billion, and adjusted net income increasing by 6% to $1.7 billion. Reported diluted earnings per share (EPS) grew by 2% to $1.79, reflecting solid profitability. With a leverage ratio of 4.3% and a liquidity coverage ratio of 129%, CIBC is well-positioned to manage its financial obligations and liquidity needs effectively.

In the case of strategic moves, CIBC’s strategy of deepening client relationships and focusing on high-growth segments and markets has been effective. This approach is expected to continue supporting revenue growth and market expansion.

Meanwhile, the bank has maintained expense discipline, with strategic investments and performance-based compensation driving higher expenses and expected to support long-term growth. All together, it’s a strong investment for those seeking a stable bank that’s keeping finances under control until the market recovers.

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 Bank Stocks

Bank sign on traditional europe building facade
Bank Stocks

Big Bank Bargain: BMO Stock Just Dropped 8%, and That Looks Like a Deal

Bank of Montreal (TSX:BMO) stock looks way too cheap after a rough quarterly flop.

Read more »

falling red arrow and lifting
Bank Stocks

Should Investors Buy the Correction in TD Stock?

TD now offers a 5.4% dividend yield. Has the stock bottomed?

Read more »

Financial technology concept.
Bank Stocks

TD Stock: Buy Now or Stay Away?

Should you buy TD stock on the dip to capture future upside potential?

Read more »

consider the options
Bank Stocks

Is it Too Soon to Buy TD Stock?

TD stock dropped more than 12% so far in 2024. Is more downside on the way?

Read more »

consider the options
Bank Stocks

Is it Too Late to Buy Bank of Nova Scotia Stock?

Bank of Nova Scotia is up 15% from the 12-month low.

Read more »

edit Four girl friends withdrawing money from credit card at ATM
Bank Stocks

2 Bank Stocks Ready to Run for the Money

While they might not be the biggest, these bank stocks could be the best for investors looking for higher dividends…

Read more »

path road success business
Bank Stocks

Scotiabank Is Down 0.9% After Earnings: What Investors Need to Know

Bank of Nova Scotia (TSX:BNS) released earnings yesterday. Here's what you need to know.

Read more »

money cash dividends
Stocks for Beginners

Is TD Stock the Best Dividend Stock for You?

Shares of TD stock (TSX:TD) plunged on the news of a money laundering probe. But could this mean it's a…

Read more »