A stock climbing nearly 50% in a year doesn’t exactly scream “undiscovered bargain.” Usually, that’s about the point investors start wondering whether they’ve missed the party and should wait for everyone to go home.
Sometimes, however, the business is changing almost as quickly as the share price.
That’s particularly important with banks. A bank stock shouldn’t keep climbing simply because investors are willing to pay more for the same earnings. Eventually, that trick runs out. I’d rather see profits rise, returns improve, and the company find new places to deploy capital.
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What to watch
One useful number is return on equity (ROE), which shows how efficiently a bank turns shareholders’ money into profit. Another is earnings-per-share (EPS) growth. If both are moving higher, a rising stock price becomes much easier to defend.
Capital also deserves attention. Canadian banks must hold substantial buffers against unexpected losses, meaning management can’t simply throw every spare dollar into acquisitions, dividends, and share repurchases. That discipline has helped make Canadian bank stocks such effective long-term compounders.
One bank has been putting those ingredients together particularly well.
NA
National Bank of Canada (TSX: NA) spent much of its history with an obvious geographic strength: Quebec.
Then it bought Canadian Western Bank. The roughly $5 billion acquisition closed in February 2025 and gave National Bank stock considerably more exposure to Western Canadian commercial banking. Instead of building that business province by province over decades, National Bank stock essentially bought itself a much larger national footprint.
That’s the kind of acquisition that can either create years of growth or an expensive corporate headache. So far, I like what I’m seeing. In the second quarter of fiscal 2026, National Bank’s adjusted earnings per share rose 13% year over year to $3.23. Adjusted ROE climbed to 16.8% from 15.6%.
Personal and commercial banking has been particularly encouraging. The bank reported organic growth alongside CWB-related synergies, while wealth-management revenue also increased strongly. The CWB deal, therefore, isn’t merely making National Bank stock bigger. Management is starting to make the combined business more profitable.
More to come
National Bank isn’t finished adding pieces. The bank agreed to acquire portions of Laurentian Bank’s retail and small and medium-sized business portfolios in a transaction expected to close in late 2026, subject to the required conditions and approvals.
That should give National Bank another opportunity to add customers and deposits without swallowing an entire competitor. Meanwhile, shareholders are getting paid while management works. National Bank increased its quarterly dividend by eight cents in May to $1.32 per share, a 6% increase. That followed an increase to $1.24 late last year.
That works out to $5.28 annually today. At a recent share price around $223, the yield is only about 2.4%, so this isn’t the bank I’d buy simply to maximize immediate passive income. Even so, here’s what $7,000 could bring in.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| NA | $223.00 | 31 | $5.28 | $163.68 | Quarterly | $6,913.00 |
Add in more growth
The appeal is what could happen to that dividend if earnings keep growing. Reinvesting rising payments from quality Canadian dividend stocks can turn a fairly modest starting yield into something much more impressive over a long holding period.
National Bank stock rose roughly 49% over the last 12 months, and they now trade around 20 times trailing earnings. That’s not cheap for a Canadian bank. CWB integration still carries execution risk, while a weaker Canadian economy could push credit losses higher. The Laurentian transaction adds another moving part.
Those risks are exactly why I wouldn’t chase National Bank stock expecting another 49% by next summer. Yet I wouldn’t wait for the stock to become obviously cheap either. National Bank has added a major Western Canadian commercial franchise, adjusted earnings are still climbing at a double-digit rate, ROE is improving, and the dividend just received another chunky increase.
Bottom line
In short, the share price has already run. If National Bank can turn its much larger Canadian footprint into years of higher earnings, though, the business may still have plenty of catching up to do.
