Canadian bank stocks are among the best long-term options for investors to consider. Not only do the bank stocks offer growth and income-earning potential, but they also boast sizable defensive moats.
During August, the big banks saw near-double-digit gains. Here’s a look at what that means for investors and some of the best Canadian bank stocks to add to your portfolio.
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Invest in Scotiabank for growth and income
Bank of Nova Scotia (TSX: BNS) finished August up nearly 10%. That impressive gain can be attributed to two unique factors for investors looking at Canadian bank stocks to consider.
First, the bank has been undervalued in recent years, particularly when compared to its peers.
Part of the reason for that is Scotiabank’s shifting stance on expansion. Scotiabank’s focus on international markets to fuel growth isn’t unique, but the markets that Scotiabank chose to focus on were unique.
Specifically, Scotiabank turned to higher-growth markets in Latin America to fund growth. Those markets, although high-growth, also carry a higher risk.
To offset this risk, Scotiabank has refocused its growth efforts in recent years on the North American market. As a result, while this transition was underway, Scotiabank lagged its peers. That lag seems to be coming to an end, which leads me to the second point.
The second point comes down to results and, to a lesser extent, potential.
The big banks are some of the best long-term holdings for any well-diversified portfolio. In addition to a solid domestic segment, Scotiabank’s diversified international segment provides solid results.
That allows Scotiabank to invest in growth and pay out a very juicy yield. As of the time of writing, Scotiabank’s dividend pays out a handsome 5.07% yield.
Consider BMO to fuel your portfolio
Another one of the great Canadian bank stocks that rose significantly in August is Bank of Montreal (TSX: BMO). During the month of August, BMO’s stock price surged 8%.
BMO isn’t the largest of the big banks, but it is the oldest. In fact, BMO has been paying out dividends for nearly two centuries without fail. This makes the bank a stellar option for income-seeking investors.
As of the time of writing, BMO’s quarterly dividend works out to a respectable 3.82%. Further to that, BMO has an established history of providing annual upticks to that dividend. This makes the bank stock an excellent choice for investors seeking a buy-and-forget income stock.
BMO’s gains are largely fueled by the potential for inflation to make a soft landing. Interest rates have held, and there’s rising sentiment for rate cuts. This helps to allay fears about the potential for a deep recession. Against that backdrop, BMO emerges as a solid option for growth and income seekers alike.
Speaking of growth, BMO offers investors huge growth potential. The bank has expanded heavily into the U.S. market over the past decade and is now one of the largest banks in that market.
For any investor looking at Canadian bank stocks to invest in, BMO should be near the top of any list.
Canadian bank stocks to buy
Both Scotiabank and BMO offer investors incredible long-term growth potential despite their stellar performance in August. Additionally, they can provide a juicy dividend that continues to grow.
In my opinion, one or both of these bank stocks should be core holdings in any well-diversified portfolio.
