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2 Cheap Canadian Bank Stocks to Buy Before They Soar

Bank sign on traditional europe building facade
Image source: Getty Images

Written by Adam Othman at The Motley Fool Canada

The stock market has been incredibly volatile in 2023. While investing in growth stocks might not be the best way to put your money to work in the stock market, the TSX offers plenty of opportunities to income-seeking investors.

The higher interest rates and inflation slowing economic activity have also caused share prices to decline across the board. While that means increased pressure on most publicly traded companies, people investing in dividend stocks can enjoy higher-yielding distributions. Due to share prices going down, the dividend yields for most dividend stocks have become inflated.

The companies paying unsustainably high dividends might slash payouts to keep financials healthy. However, high-quality companies that are well-capitalized enough can weather the storm without slashing payouts.

The key to success is identifying and investing in stocks capable of navigating the harsh waters of a volatile market. To this end, we will discuss two Canadian bank stocks you can consider adding to your portfolio.

Toronto-Dominion Bank

Toronto-Dominion Bank (TSX:TD) is the larger of the two bank stocks. Boasting a $152.23 billion market capitalization, it is one of the Big Six Canadian banks.

TD Bank stock has an impressive capital ratio and the ability to make several sizeable deals in the next few years. TD Bank stock might be a no-brainer for Canadians seeking a passive-income stream. The bank stock has paid its shareholders their dividends for almost two centuries without fail.

Despite its reputation as one of the biggest banks in the country, it presents a case for value-seeking investors. As of this writing, TD Bank stock trades for $83.30 per share, down by 11.43% from its 52-week high.

While weakness in the broader market has led to a downturn in its share prices, TD Bank stock is well positioned to post a strong recovery when the bull market arrives. At current levels, it pays its shareholders their quarterly payouts at a juicy 4.61% dividend yield that you can lock into your portfolio today.

National Bank of Canada

National Bank of Canada (TSX:NA) is also one of the Big Six Canadian banks, but it does not come close to the rest of its peers in that category. Headquartered in Toronto, the National Bank of Canada has a $30.28 billion market capitalization.

While the other Big Six Canadian banks dwarf it, NA stock is not a dividend stock to shrug aside easily. Having been in a state of flux for several years, it is still a well-run regional bank.

Unlike other regional peers, National Bank of Canada has plenty of room to grow. The management team runs the bank conservatively, allowing it to minimize its financial pressures. As of this writing, National Bank of Canada stock trades for $89.52 per share and pays its investors a juicy 4.56% dividend yield that you can lock into your portfolio today.

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Foolish takeaway

Despite there being no way to determine when the stock market will see bullish conditions again, it is going to happen. Due to the cyclical nature of the market, it sees bullish and bearish conditions.

As the bear market continues, bank stocks like TD Bank and National Bank of Canada might see more sideways or downward trading. However, when the dust settles, these two bank stocks are well-positioned to deliver superior returns as they recover to higher valuations.

If you are looking for a way to generate dividend income at higher-than-usual yields and combine that with long-term capital gains to grow your wealth, these two bank stocks might warrant a place in your self-directed investment portfolio.

The post 2 Cheap Canadian Bank Stocks to Buy Before They Soar appeared first on The Motley Fool Canada.

Should You Invest $1,000 In National Bank of Canada?

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Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in November 2023... and National Bank of Canada wasn't on the list.

The online investing service they've run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 24 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks * Returns as of 11/14/23

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Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

2023