Canadian banks have a proven track record of delivering superior returns through economic cycles, thanks to their rock-solid balance sheets and consistent profitability. As we look to 2026 and 2027, their fundamental strengths position them to outpace global peers once again.
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Toronto-Dominion Bank
Toronto-Dominion Bank (TSX: TD) is among the large-cap banks I continue to tout as not only a top dividend stock, but one that could deliver solid long-term total returns as well.
The fundamentals appear to support such a thesis. In its last quarterly print, TD smashed forecasts and raised guidance toward an adjusted return on equity of 13%. This number is expected to be supported by roughly 6–8% earnings per share growth. That’s the kind of underlying financial strength many investors are after.
Notably, TD’s management team also noted it is wrapping up an $825 million restructuring program this year. That move alone should unlock $750 million in annual savings to fuel earnings acceleration toward a 16% ROE by 2029. That’s all the while this bank maintains a CET1 ratio over 13% for resilience.
Of course, I think investors shouldn’t be sleeping on that 4.4% dividend yield (backed by a sustainable 50.6% payout ratio). That’s key to this story. However, with $7 billion in buybacks and plenty of margin growth expected over time as net interest income picks up, there are more catalysts to consider with TD than many may think.
Royal Bank
Royal Bank (TSX: RY) is the undisputed giant in the Canadian banking system. Indeed, it’s this company’s size and scale that brings many investors into the fold.
I think this defensive nature is a positive, as we head into what could be some choppy waters this year. That said, I also think Canada’s largest financial institution by market cap is primed to crush it from a growth angle in 2026–27. Indeed, given the company’s Q1 earnings beat on both the top and bottom line, there’s a lot to like about the company’s AI-driven efficiencies and world-class tech in boosting margins down the road.
I also think the company’s wealth management division and U.S. expansion will diversify revenues significantly over time. With a very juicy dividend yield, a stable payout ratio, and capital appreciation expectations in the high single digits, investors can earn a conservative double-digit return over the long term simply by staying invested. That’s a simple thesis I can get behind.
Bank of Nova Scotia
Bank of Nova Scotia (TSX: BNS) is another leading Canadian bank with plenty of fundamental support to justify its current share price growth trajectory.
Indeed, Scotiabank turned heads in Q1 2026, with its revenue leaping to $8.5 billion from C$6.8 billion last year. Additionally, the company’s earnings per share doubled to $1.74 on a stellar 26.3% net margin. Balance sheet tweaks and international growth are boosting key fundamental operating metrics faster than those of peers, with net income at $8.4 billion supporting a juicy 4.2% dividend yield.
Compared to other global banks, Scotiabank stands out to me as a top option for those seeking both domestic growth within Canada and long-term growth from other high-growth international markets. This is the sort of total return play I think makes sense right now, and the market appears to agree.
