Canada’s big banks have long been viewed by many as top holdings for long-term growth and generating recurring income streams. But moving into 2027, should investors keep adding to Canadian bank stocks?
The answer to that question depends on which bank you own. Each of the Canadian bank stocks offers something different.
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Royal Bank and TD: Core portfolio holdings
Royal Bank of Canada (TSX: RY) is a natural starting point for investors seeking an established core holding. It’s the largest of the big banks, and its banking operations are supported through several sources of earnings. That includes its wealth management and capital markets businesses, in addition to its core lending and banking business.
That diversification was part of the reason why Royal delivered adjusted earnings per share of $4.28 in the most recent quarter. That’s an 11% improvement over the same period last year. During that same quarter, adjusted return on equity reached 18.1%.
For income seekers, Royal offers a quarterly dividend that pays a yield of 2.5% as of the time of writing. The bank has also provided annual increases to that dividend for over a decade.
Toronto-Dominion Bank (TSX: TD) offers investors a similar core-holding role. TD is the second-largest of the banks, with exposure to both the Canadian and U.S. banking markets.
In the most recent quarter, TD reported adjusted earnings per share of $2.77, an improvement over the $2.20 posted in the same quarter last year.
Like Royal, TD offers a quarterly dividend, which it has paid for well over a century without fail. As of the time of writing, the bank offers a yield of 2.6%.
BMO and Scotiabank: Income with different exposures
Both Bank of Montreal (TSX: BMO) and Bank of Nova Scotia (TSX: BNS) provide investors with a more income-focused role.
Both banks have banking operations in Canada and the U.S., alongside wealth management and capital markets businesses.
BMO is the oldest of the big banks and has paid dividends for nearly two centuries without fail. The bank yields 2.8% and has amassed over a decade of annual increases.
In the latest quarter, BMO reported that adjusted earnings per share increased 22% over the same period last year.
This makes BMO a great option for investors seeking income and growth from North American markets.
Scotiabank offers a higher yield, which, as of the time of writing, comes in at 3.5%. Another clear differentiator is Scotiabank’s focus on international banking operations, which gives investors a geographic mix.
Scotiabank’s adjusted return on equity improved to 14.2% in the third quarter from 12.4% a year earlier. For income-seeking investors, that translates into improved profitability, making Scotiabank an option to consider.
CIBC and National Bank: Two different growth paths
Next up is Canadian Imperial Bank of Commerce (TSX: CM). CIBC provides investors with a mix of primarily Canadian banking exposure along with commercial banking, wealth management and capital markets operations.
The bank does have a presence in the U.S., but its international presence is much smaller than most of its big bank peers’.
CIBC’s adjusted third-quarter earnings per share came in 26% higher than the same quarter last year, while adjusted return on equity reached 16.8%. Stronger earnings give CIBC more room to support future dividend increases.
Speaking of dividends, CIBC offers a yield of 2.6%. The bank has also provided annual upticks to that dividend for over a decade.
Finally, there’s National Bank of Canada (TSX: NA), which is the smallest of the Canadian bank stock picks. National’s acquisition of Canadian Western Bank provides the bank with opportunities to expand to a larger portion of the country.
As of the time of writing, National offers a dividend yield of 2.5%.
Canadian bank stocks: Buy, sell, or hold for 2027?
No stock is without risk, and that includes well-established picks like the big banks. For 2027, my bank stock purchases would focus on income and defensive appeal.
That means Scotiabank and Royal are the top two I would pick, but that doesn’t mean I would discount any of the others.
These bank stocks are worth considering as part of a well-diversified portfolio.
