The trade war that arose since the arrival of Donald Trump in the Oval Office across the border and ensuing tariffs being thrown around left, right, and centre are having an impact on the economy. The effect of the uncertainty amid trade tensions is quite apparent if you look at the S&P/TSX Composite Index. After a strong run of several months, the Canadian benchmark index is down by 5.11% from its 52-week high.
Stocks across the board are seeing a downturn in share prices. Even the top bank stocks are trading at discounts from recent all-time highs. Newer investors might see this as a time to run with their tails between their legs and avoid the stock market. However, experienced investors will look at this as a good opportunity to invest in high-quality stocks at discounted valuations.
The Canadian banking sector is one of the most resilient in global markets. While volatile market conditions can lead to downturns, Canadian banks have a track record for bouncing back and continue delivering substantial long-term returns.
Against this backdrop, here are two compelling buys from the Canadian banking sector you can consider for your self-directed portfolio right now.
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Bank of Nova Scotia
Bank of Nova Scotia (TSX: BNS) is a $85.78 billion market capitalization bank headquartered in Toronto. Better known as Scotiabank, the multinational financial services company is the third-largest in the industry based on deposits and market capitalization. It is one of the Big Six banks, financial institutions that have stood the test of time over the decades.
It is a reliable dividend stock that many investors own to generate a passive income through its quarterly payouts. Scotiabank stock offers a $1.06 per share quarterly dividend, equating to $4.24 per share each year. While the stock has not increased its payouts for the last two years, the stock has the ability to fund its payouts comfortably. It has been paying dividends since 1833 and hasn’t cut payouts for half a century.
As of this writing, it trades for &68.87 per share, down by 14.06% from its 52-week high. At current levels, it offers dividends at a juicy 6.16% dividend yield that you can lock into your self-directed portfolio today.
Bank of Montreal
Bank of Montreal (TSX: BMO) is a $101.59 billion market capitalization stock and another one of the Big Six Canadian banks. The diversified financial services provider has operations throughout North America. BMO stock stands out from its peers due to its dividend-paying streak that spans almost two centuries. Its 196-year dividend streak is the longest for any publicly traded company in Canada.
Over the last 15 years, BMO stock has increased its dividends at a 5.4% compound annual growth rate. The bank’s solid financials, diversified revenue streams, growing deposit base, and exceptional operational efficiency let it maintain and grow its dividend payouts. Its strong balance sheet also positions the bank to capitalize on growth opportunities should they arise.
As of this writing, BMO stock trades for $139.17 per share, down by 7.88% from its 52-week high. It boasts a 4.57% dividend yield that you can lock into your portfolio.
Foolish takeaway
Together, these two bank stocks have demonstrated adaptability and resilience over the decades, even in the face of some of the most extreme economic uncertainties. More than adequate risk management practices, strategic expansions, and solid financial performances make them solid investments if you seek stability in an unstable market.
