Canadian bank stocks have been off to an impressive start despite fears that Trump’s tariffs could send Canada’s economy into a recession. While the recession and tariff risks haven’t really gone anywhere, it seems like the broad TSX Index is ready to continue its march to new highs.
The so-called Big Six Canadian bank stocks have become the quiet leaders of this latest market rally. And while we’ll eventually be due for more turbulence at some point down the line, I wouldn’t yet throw in the towel on the Canadian financials now that they’re getting back into a groove.
In this piece, we’ll check in on two Canadian bank stocks that may appeal to a broader crowd going into the summer months. So, whether you’re a value investor, an income-focused investor, or more of a momentum-seeking trader, the following trio, I think, seems ripe for picking up.
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TD Bank
I’ve been a big believer in the comeback story of TD Bank (TSX:TD) despite last year’s non-stop negative headlines surrounding restrictions and penalties imposed following the bank’s money-laundering fiasco. With new managers aboard and a spruced-up, new growth plan, it should be no mystery as to why TD stock has been outpacing the TSX Index and S&P 500 in recent months.
The big bank has paid its fines, penalties, and so forth, and it’ll settle with the asset cap on U.S. assets. As it sells some of its non-core assets, TD will have plenty of liquidity to make major moves. The big question is what will new CEO Raymond Chun do with TD’s cash hoard?
Beyond dividend hikes and buybacks, I’d look for TD to make a huge deal on this side of the border. While TD is still playing the long game in the U.S. market, it won’t be a primary growth engine until U.S. restrictions are taken off, something I view as unlikely in the next five years.
For now, investors can collect a solid 4.4% dividend yield at a low price of admission while the name is going for 9.9 times trailing price-to-earnings (P/E). Dare I say TD stock looks like the cheapest and timeliest of the Big Six this June?
National Bank of Canada
National Bank of Canada (TSX:NA) stock has been on a red-hot run of its own since bottoming out in early April (the post-Liberation Day sell-off), and it is now up close to 22% in a few short months.
Indeed, if you got greedy as others hit the panic and sell buttons, you did pretty well with the $53 billion banking underdog. Though National Bank is still the smallest of the Big Six, it’s quickly becoming one of Canada’s better-performing financials.
After a hot two-month run, I’d still not look to take profits. Not while shares go for less than 13 times trailing P/E. Of course, the 3.5% dividend yield pales in comparison to the yields of its bigger brothers in the Big Six.
However, if you’re looking for greater growth prospects and resilience in volatile macro conditions, I’d stick with the name and consider adding to a position on pullbacks.
