The Canadian bank stocks still seem like great bets, even if you’re not the biggest fan of chasing red-hot momentum. Though things do seem just a bit choppy and maybe even slightly toppy, I still think the banking trade has what it takes to keep the good quarters coming along. Of course, expectations have increased considerably of late, thanks in part to some magnificent results from the broad basket of Big Six names, all of which seem like boats enjoying the rising tide across the industry.
Despite the skepticism and downgrades of some analysts, I urged investors to stick with the big bank names as they rolled through earnings. Sometimes, a higher bar can still be passed as the fundamentals really begin to shine. Remember, many analysts were also feeling a tad cautious, like most other investors, when the bank stocks were trading at their trough just over a year ago.
After an explosive rally, many have changed their tunes, but calling a reversal in the momentum, I think, could prove tricky. And that makes the bank stocks tough to bet against or sell unless, of course, you’re willing to buy back into Canada’s big banks at higher prices down the road.
Source: Getty Images
TD Bank tops estimates with an exclamation mark!
Either way, another season of bank earnings is kicking in, and the results have been pretty good so far, with TD Bank (TSX: TD) clocking in a stellar beat alongside a dividend raise. Shares rose just over 2% on the day as shares broke out past the $120 per-share level for the first time.
As a value investor with a preference for buying dips, I get why one would be hesitant when it comes to chasing a bank stock that’s been on an explosive past-year run. That said, the valuation still makes sense, and the fundamentals just seem to keep getting better. At the end of the day, aren’t these factors far more important than what a stock has done in the recent past?
In my opinion, TD Bank stock remains one of the best Canadian dividend (growth) stocks to own, period. Yes, the opportunity to get a bargain has come and gone, but that doesn’t mean there isn’t much gain to be had from here.
With a decent 3.57% dividend yield and a spectacular fourth-quarter result in the books that beat analyst expectations, I’d not sleep on the name as its comeback continues into its second year under a new CEO whom I’ve praised numerous times in the past. CEO Raymond Chun is the real deal, and there’s probably more performance on the way as the bank’s “back to winning” strategy continues to play out.
CIBC also clocked in a strong result
It’s not just TD Bank that’s been on a hot run into earnings. CIBC (TSX: CM) also shocked and awed with its result, which also accompanied a nice dividend hike. Shares of CM rose more than 4% on the day. And with explosive momentum, just like most other Canadian bank stocks, I continue to view the name as a buy.
The 3.2% yield has compressed in recent years, and the valuation isn’t as low as it used to be, now at around 15.3 times trailing price to earnings (P/E). Still, I think the banks continue to prove their worth as the year comes to a close and the names look to pull a repeat in 2026.
Between CIBC and TD, I’d have to go with the latter due to the lower price of admission (shares still trade at under 11 times trailing P/E). However, I’m not against owning both at these levels!
