The United States is currently experiencing its highest inflation rates since the 1980s. In general, periods of high inflation are not ideal for growth stocks. However, they can be an excellent time to buy bank stocks. This is because high inflation usually prompts the Federal Reserve to raise interest rates. Higher interest rates allow banks to charge more interest on their loans and increase their profitability. Additionally, bank stocks are also known for paying consistent dividends. With that in mind, let’s examine the five best Canadian bank stocks based on their dividend payment.
At first, the idea of buying Canadian bank stocks may seem a little random. However, there are plenty of reasons why it can be a good idea. To start, buying Canadian stocks can help diversify your portfolio geographically. If the U.S. market continues to plummet then you’ll be somewhat protected by having a portion of your portfolio in Canadian markets.
Additionally, bank stocks are known for consistent revenues and high dividends. During times of economic uncertainty, these dividend payments almost guarantee investors a return. I say almost because there is always a slight chance that the company cuts its dividend payment. However, it’s fairly safe to assume that they will pay it. When the market is down 20% YTD, a guaranteed return of 4-5% looks a lot more attractive. Now, let’s check out a few good Canadian banking stocks to start with.
Dividend Yield: 5.44%
The Bank of Nova Scotia, also called Scotiabank, is Canada’s third-largest bank by deposits and market capitalization. It serves more than 25 million customers and offers products for both consumer and commercial banking. In terms of its dividend, Scotiabank is one of the most consistent Canadian bank stocks out there. Scotiabank has increased its dividend by 6% annually since 2011. In 2021, it paid an annual dividend of CAD $3.60.
In Q2 2022, Scotiabank reported revenue of CAD $7.72 billion and a net income of $2.67 billion. These numbers were up 6.89% and 3.28 respectively year-over-year (YoY).
Dividend Yield: 4.79%
Canadian Western Bank is the only full-service financial institution in Canada. This means that it offers solutions for personal and commercial banking, specialized financing, wealth management, and trust services. One thing that sets Canadian Western Bank apart is that it is relentlessly focused on its customers. In fact, it has a brand promise of being “Obsessed with your success.” In general, companies that obsess over customer experience tend to perform well.
In Q2 2022, this Canadian bank stock reported revenue of CAD $247.5 million and a net income of $81.39 million. Revenue was up 6.57% YoY but net income was steady.
Dividend Yield: 4.57%
The Laurentian Bank of Canada is a Schedule 1 bank that mainly operates in Quebec. Notably, the Laurentian Bank of Canada is also undergoing a transition that started in 2021. This transition includes hiring a new leadership team, creating a new cost structure, and developing a new plan for growth. Part of its growth plan involves expanding its equipment financing division, particularly in the U.S. It expects this to be one of its biggest growth drivers in the next few years. In general, the Laurentian Bank of Canada wants to expand its presence in the U.S. By 2024, it plans to have 18% of its commercial loans coming from the U.S. (up from 14% in 2021).
In Q2 2022, The Laurentian Bank of Canada reported revenue of CAD $246.6 million and a net income of $59.55 million. Revenue was fairly steady YoY but net income was up 12.23%.
Dividend Yield: 4.40%
As far as Canadian bank stocks go, the Bank of Montreal is another one that shows consistent dividend growth. It recently boosted its quarterly dividend to $1.39, which is up 31% year over year. The Bank of Montreal operates in four different sectors. These include Canadian personal and commercial, U.S. personal and commercial, wealth management, and capital markets. It is also the 8th largest bank in North America by total assets and serves 12 million customers each year.
In Q2 2022, the Bank of Montreal reported revenue of CAD $9.27 billion and a net income of $4.76 billion. These numbers were up 55% and 265% respectively YoY.
Dividend Yield: 4.27%
Toronto-Dominion Bank, also called TD Bank, is North America’s 6th largest bank by total assets. It operates 2,216 retail locations total, mainly in Canada and the United States. In the U.S., the majority of its locations are located in the northeast and Florida. This means that it still has plenty of opportunity to expand across the rest of the country. Additionally, TD Bank has a 164-year history of paying a dividend. In 2022, it plans to pay out CAD $3.56 per share. This represents a dividend growth rate of 11% CAGR since 1995. This makes it one of the best Canadian bank stocks based on its dividend. In Q2 2022, TD Bank reported a net income of CAD $3.81 billion which was up 3.14% YoY.
I hope that you’ve found this article on the five best Canadian bank stocks to be valuable! Please remember that I’m not a financial advisor and am just offering my own research and commentary. As usual, please base all investment decisions on your own due diligence.
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