With the TSX Index now up more than 12% since those year-to-date April lows, Canadian investors may be wondering if it’s safe to get back into the markets, even as tariff uncertainties remain going into the summer months. Indeed, there hasn’t been all too much progress on the tariff front. But with a framework for a trade deal between the U.S. and the U.K., one has to think that a Canada-U.S. deal can’t be all too far behind, especially after Mark Carney’s visit to the Oval Office.
In any case, I think patience on the part of investors will be rewarded. And though tariffs could certainly pave the way for a rough second half, the real opportunity, at least in my view, lies with hard-hit names that can thrive in the next five years. The big question that remains is whether the minimum 10% tariff can be eliminated as talks progress and we begin to de-escalate things rather than going for a tit-for-tat trade war that amounts to nothing more than economic pain.
In this piece, we’ll check in on what I believe is one of the most underrated Canadian dividend stocks. Enter shares of National Bank of Canada (TSX:NA), the sixth largest of the Big Six Canadian bank stocks. The name has been recovering of late, recently surging past pre-Liberation Day levels. And while the Liberation Day sell-off seems to have been a drastic overreaction on the part of investors, I do think that there’s still value out there as the market looks to consider its path forward as the tug-of-war between bulls and bears gets a bit closer.
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National Bank of Canada looks incredibly cheap as shares ricochet off year-to-date depths.
Now up more than 16% from year-to-date lows, shares of NA are really starting to heat up and make up for lost time. And though there’s still some ground to rise before new all-time highs are hit, I do see a path higher despite the negative impact of tariffs on Canada’s economy.
The stock trades at just 11.4 times trailing price-to-earnings (P/E) to go with a 3.7% dividend yield. As one of the smaller and best-performing members of Canada’s Big Six basket of bank stocks in recent years, investors should think about warming up to the name as some of its much-larger peers run into a bit of pressure.
At the end of the day, National Bank is an exceptionally well-managed bank that’s shown it has all the tools it takes to play catch-up as it expands its presence with the hope of taking a bit more share away from its larger incumbents.
The smaller, better performer of the Big Six
Over the past five years, the stock has more than doubled, soaring 124%, while offering a rich dividend. These kinds of gains are leaving the rest of the five in the dust. Personally, I think National Bank has what it takes to continue outpacing its bigger brothers in the next five years. With a fantastic management team and room to run domestically, I’m inclined to view NA stock as the top bank stock to buy at under $125 per share.
