5 Canadian bank stocks to buy amid dividend expectations

Highlights

• One of the banks listed below donated C$ 500,000 to support the needs of affected people in Afghanistan.
• That same bank recovered credit losses of C$ 70 million in Q3 FY21
• The highest one-year stock price return of the banks featured was nearly 52 per cent.

With the release of the third-quarter results and the announcement of dividends by most Canadian banks, these banks are returning to normalcy with the recovery of credit losses and higher performing loans on their balance sheets. The reported earnings posted by one of these banks grew 58 per cent Year-over-Year (YoY) in the latest quarter.

The Canadian Imperial Bank of Commerce posted a YTD return of 33.49 per cent outperforming the S&P/TSX Capped Financial Index whose YTD return was 22.94 per cent.

Considering that, let us explore some of these Canadian banking stocks.

1. Royal Bank of Canada (TSX: RY)

This diversified bank held a market cap of C$ 184.69 billion on September 1, 2021. Royal Bank of Canada provides all kinds of capital market and banking services. Although it is concentrated in Canada, it also operates in the US and few other countries.

The shareholders of Royal Bank are expected to receive quarterly dividends of C$ 1.08 per share on November 24, 2021. The dividend yield of the bank was 3.33 per cent on September 1, 2021. The bank currently holds a price-to-earning (P/E) ratio of 12.2 and a return on equity (ROE) of 18.06 per cent.

The stock price of the bank closed at C$ 129.6 on August 31, 2021. It expanded by 30 per cent over the past year.

In the third quarter of fiscal 2021, Royal Bank of Canada posted a net income of C$ 4.3 billion, up 34 per cent YoY. The Common Equity Tier 1 (CET1) ratio it posted was 13.6 per cent in the same quarter.

The credit quality of the performing loans improved in the latest quarter as per the bank's management.

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2. Toronto-Dominion Bank (TSX: TD)

This bank with a C$ 149.31 billion market cap on September 1 is one of the largest banks in Canada operating with Canadian and US retail divisions along with other banking divisions. Toronto-Dominion Bank is expected to pay quarterly dividends of C$ 0.79 per share on October 31, 2021. The dividends grew at a five-year average of 8.41 per cent.

On May 27, 2021, the stock price of Toronto-Dominion Bank reached its 52-week high of C$ 89.12, and it closed at C$ 81.93 on August 31. It returned close to 14 per cent on a year-to-date (YTD) basis and increased by nearly 26 per cent over the past year.

Toronto-Dominion Bank posted reported earnings of C$ 3.5 billion in Q3 FY21, up 58 per cent YoY. However, its adjusted net income was C$ 3.6 billion in the same quarter.

On the valuation metrics, the bank held earnings per share (EPS) of 8.49 and ROE of 17.67 per cent on September 1, 2021.

Also Read: Royal Bank of Canada Q3 Profit Soars 34% YoY: Buy Alert for RY stock?

3. Bank of Nova Scotia (TSX: BNS)

The bank operates under five various divisions while being concentrated in South and Central America and spans various countries. The bank is likely to pay quarterly dividends of C$ 0.9 on October 27, 2021. Its current dividend yield stands at 4.6 per cent.

The Bank of Nova Scotia also held a price-to-book (P/B) ratio of 1.5, ROE of 12.71 per cent, and a market cap of C$ 94.96 billion on September 1.

At market close on August 31, the bank's stocks were priced at C$ 78.15 and traded five per cent below its 52-week high of C$ 82.35 on this day. Over the past year, stocks expanded by close to 39 per cent. However, it dipped by three per cent on a quarter-to-date (QTD) basis.

The Bank of Nova Scotia posted total revenue of C$ 7.75 billion in Q3 FY21. Its net income was C$ 2.54 billion in the same quarter.

4. Bank of Montreal (TSX: BMO)

This dividend-paying bank based in North America is scheduled to pay the next set of quarterly dividends of C$ 1.06 on November 26, 2021. The three-year average dividend growth rate stands at 6.53, and the dividend yield was 3.38 per cent on September 1, 2021.

Bank of Montreal held a market cap of C$ 81.23 billion, a P/E ratio of 11.7, and an ROE of 13.86 per cent (at the time of writing).  

The stock price of the Bank of Montreal reached its 52-week high of C$ 132.35 on August 25, 2021. It increased by nearly 52 per cent over the past year and closed at C$ 125.56 on August 31.

In Q3 FY21, the bank recovered credit losses of C$ 70 million, and its net income was C$ 2.27 billion.

As per the latest report, the bank donated C$ 500,000 to support the needs of the affected people in Afghanistan.

Also Read: National Bank (TSX:NA) posts no change in dividend for Q4: Buy or not?

5. Canadian Imperial Bank of Commerce (TSX: CM)

This bank operates with three banking divisions and primarily conducts banking services in Canada. Canadian Imperial Bank of Commerce will pay its shareholders quarterly dividends of C$ 1.46 on October 28, 2021. The dividend yield was 4.02 per cent on September 1.

The C$ 64.61 billion market cap bank posted an ROE of 15.64 per cent, EPS of 13.1, and a debt-to-equity (D/E) ratio of 1.14 (at the time of writing).

The stock price of Canadian Imperial Bank closed at C$ 145.14 on August 31 and traded nearly 51 per cent above its 52-week low of C$ 96.42 (October 29, 2020). The stock price returned 40 per cent over the past year.

Canadian Imperial Bank reported a net income of C$ 1.73 billion in Q3 FY21. Its Common Equity Tier 1 ratio was 12.3 per cent in the same quarter.

Bottom line:

The recovery of credit losses and a higher percentage of performing loans in the balance sheets of these banks can be seen as a welcome move by shareholders.