Investors who have a decent chunk of capital to put to work in the market may certainly have good reason to look at Canadian bank stocks. Most of the top Canadian banks continue to provide robust growth year after year, with solid dividend income to boot. And given the heavily regulated nature of the Canadian banking sector, an argument can be made that these top stocks are worth buying from a growth, income, and value standpoint.
Here are my top three Canadian bank stock picks I think investors would be remiss to ignore right now.
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Royal Bank
Royal Bank of Canada (TSX: RY) continues to be Canada’s largest and most prominent lender. As a top-10 global bank for quite some time, Royal Bank is also one of the systemically important banks in the system, so the whole “too big to fail” label really does apply to this top lender.
With one of the most robust and diverse lending portfolios of this group and a strong international presence, Royal Bank continues to dominate the mind share of most investors who think of Canadian bank stocks.
With a dividend yield of 3.5% and the highest valuation multiple of this group, it’s clear the market is viewing Royal Bank as the safest and most durable pick in this space. I’d have to agree.
TD Bank
Toronto-Dominion Bank (TSX: TD) is the second largest player in the Canadian banking system, and it has actually become a top player in the U.S. retail banking space, thanks to a number of post-GFC acquisitions made at very favourable prices.
This has led TD to become one of the dominant players on the Eastern seaboard, and one that I think has some of the best growth upside of the group thanks to its outsized U.S. exposure.
Yes, the geopolitical environment is very different today, and some Canadian investors may be looking for less exposure to U.S.-related names. But over the long term, I think TD stock will continue to be a winner with its 4.4% dividend yield and price-earnings multiple around 10 times.
Scotiabank
The most attractive Canadian bank stock from a dividend perspective (with a yield of nearly 6%), Bank of Nova Scotia (TSX: BNS) also ranks as one of the more robust growth prospects of its Canadian banking peer group. Much of that has to do with the company’s Latin American exposure, which I’ve long argued provides a growth engine that’s superior to its larger peers listed above.
Now, the company’s valuation multiple does reflect this growth potential, so on an overall basis, investors are likely taking a bit more risk in owning this name. But as part of a three-stock portfolio for an investor looking to put $15k to work, I think these three top picks provide the requisite yield, growth, and safety most long-term investors are after.
