Canada’s Big Five bank stocks to buy & hold long term

Highlights

  • One of the reasons Canadian banks command respect is because it was relatively unscathed when the financial crisis of 2007-2008 hit.
  • All the banks listed here pay out dividends.
  • The highest dividend yield of the banks listed below was 4.501 per cent.

Bank stocks in general are usually some of the most stable stocks for investors to consider. They generally tend to stay aloof from the daily histrionic trends in the stock market. And it’s certainly no fool’s errand to invest in stocks of Canadian banks.

Canada’s big banks are some of the largest in the world and they certainly punch above their weights. The sector is massive in the country and one of the most lucrative ones. One of the reasons Canadian banks command so much respect is probably because it was relatively unscathed when the financial crisis of 2007-2008 hit.

So, let us delve into the stocks of the “Big Five” banks and their performances.

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1.      Royal Bank of Canada (TSX:RY)

Considering its market cap of over C$ 187 billion, the Royal Bank of Canada (RBC) is Canada’s biggest bank. It’s also one of the country’s oldest, having been founded in 1864 in Halifax, Nova Scotia. Today, it is headquartered in Toronto and offers a diverse range of financial services.

On October 18, RBC’s stock closed at C$ 131.28 trading two per cent lower than its 52-week high of C$ 134.23. It grew nearly 35 per cent over the last year and almost 26 per cent year-to-date (YTD). It gained 4.57 per cent in the last three months.

The bank hands out quarterly dividends of C$ 1.08 and holds a dividend yield of 3.291 per cent. Its price-to-book ratio (P/B) is 2.108 and its return on equity (ROE) is 18.68.

In Q3 2021, RBC recorded a net income of C$ 4.3 billion which was 1.1 billion more of the corresponding quarter of the previous year, an increase of 34 per cent.

2.      Toronto-Dominion Bank (TSX:TD)

Toronto-Dominion Bank is the second of the largest Canadian banks. It is also a bank that has a considerable presence in the U.S.

On October 18, the bank’s stock closed at C$ 87.38 which was about two per cent below its 52-week high of C$ 89.12 posted on May 27. Its YTD growth was above 21 per cent and growth over the last 12 months was 44.62 per cent. It had grown nearly six per cent in the last one month alone.

Toronto-Dominion Bank’s stock trading volume averaged 11.73 million shares in the last 10 days. It had a market cap of 160 billion and an ROE of 17.13 per cent. Its earnings per share (EPS) was 8.49 and P/E ratio was 10.3 at the time of writing. Its dividend yield was 3.616 per cent.

Q3 2021 saw the bank post an adjusted net income of C$ 3.63 billion, up in comparison to the corresponding quarter last year which was 2.33 billion.

3.      Bank of Nova Scotia (TSX:BNS)

The Bank of Nova Scotia is a truly international institution with a base in several countries across the world. It is Canada’s third-largest bank with a market capitalization of C$ 98 billion.

Its stock held an ROE of 14.11 per cent and a dividend yield of 4.501 per cent on October 19. It had closed the previous day at 79.99, just three per cent below its 52-week high of 82.35 set on June 17. The BNS stock had a YTD return of 16 per cent and one-year return of 42 per cent. It had grown 2.3 per cent in the last month.

In Q3 2021 the Bank of Nova Scotia had an adjusted net income of C$ 2.56 billion compared to C$ 1.3 billion in the third quarter of 2020. The top management of the bank attributed the performance to having a diversified business model.

Canada Big Five Banks

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4.      Bank of Montreal (TSX:BMO)

The fourth-largest of Canada’s Big Five banks is the Bank of Montreal with a market capitalization of C$ 85 billion. Launched in 1817, it is the country’s oldest financial institution. In partnership with the BMO Financial Group, it has significant operations in Chicago.

The bank’s stock had an ROE of 13.81 per cent and a P/E ratio of 12.4. Its EPS was 10.73 on October 19. The stock also had a dividend yield of 3.197 per cent.

The BMO stock closed at C$ 132.64 October 18 and it was down on a week-to-date basis by a marginal 0.03 per cent. That possibly had to do with the fact that it clocked its 52-week high of C$ 132.88 on October 15. The stock has spiked 64 per cent in the last year and 37 per cent this year.

The adjusted net income of the bank grew four per cent quarter over quarter and it had a net income of C$ 2.3 billion in the third quarter of 2021.

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

Canadian Imperial Bank of Commerce (CIBC) is the country’s fifth-largest bank. Serving 11 million customers and businesses it holds a market cap of C$ 66 billion. The CIBC stock’s ROE was 15.58 per cent and EPS was 13.1. On October 19, it held a dividend yield of 3.95 per cent.

The CIBC stock closed trading on Monday, October 18, at C$ 147.84 just three per cent below its 52-week high of C$ 152.84 registered on August 26. It had grown 46 per cent over the previous year and nearly 36 per cent on a YTD basis.

Bottom line

Investing in the stocks of Canada’s big banks is not a fool’s errand. That said, it can’t be called foolproof either. The stocks of these banks generally tend to grow in the long run if not the near to medium term. The above also offer dividends and that income is not an insignificant bonus.

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