Yahoo Finance 3 No Brainer Bank Stocks to Buy Now for Less Than $1,000
Written by Andrew Button at The Motley Fool Canada
If you’re looking for quality dividend stocks to buy with $1,000 or less, bank stocks would be logical names to start looking at. The present high interest rate environment is favourable to banks (at least on the profitability front), while being unfavourable to most other industries. Also, Canada’s big banks have far higher yields on average than the TSX does. In this article, I will explore three top bank stocks that are worth buying – all of which can be obtained for far less than $1,000.
TD Bank
The Toronto-Dominion Bank (TSX:TD) is a Canadian bank stock that costs about $81. It is a relatively cheap stock, trading at about 14 times GAAP earnings (GAAP means standard accounting rules), and 10 times adjusted earnings (‘adjusted’ means unconventional accounting standards). The 10 adjusted P/E ratio is low even by bank standards – banks in general are pretty cheap these days. Of course, companies enjoy complete discretion in how they calculate adjusted earnings, but TD’s adjustments have mainly had the effect of “smoothing out” earnings over the years, not totally transforming them. For example, an adjustment that TD made that impeded earnings a few years ago had a positive effect in the most recent quarter.
TD Bank stock is relatively cheap compared to its peer companies. There are several reasons for this. For one, the company’s GAAP earnings have been going down due to First Horizon deal termination issues. For another, the company is under investigation for facilitating money laundering in the United States. Finally, the company offered too high a price for First Horizon when it offered to buy it out, leading to concerns about capital allocation at TD. I actually sold a chunk of my TD shares when I heard about the money laundering investigation, but I bought many of them back when I heard that the proposed penalty was a mere $8 million fine. TD definitely experienced some difficulties in 2022 and 2023, but it appears to be bouncing back. Its stock has a 5% dividend yield, so there’s a lot of income potential here.
Citigroup
Citigroup (NYSE:C) is a dirt-cheap U.S. bank going through some temporary challenges. The company’s earnings declined 38% in the most recent fiscal year, while revenue grew at a sluggish 4% pace. A big part of the company’s poor performance in 2023 was a large increase in cost of credit, which nearly doubled. The company’s provisions for credit losses also increased 70%. These major expense categories grew at frightening paces, but today, Citigroup is being advised by Warren Buffett on how to get out of the conundrum it’s in. The company has a good shot at turning things around. In the meantime, it is dirt cheap, trading at:
9.9 times earnings.
1.5 times sales.
0.6 times book value.
C stock is being given away for less than the value of its assets, net of debt! Definitely an intriguing value play here.
Goldman Sachs
Goldman Sachs (NYSE:GS) is a bank whose common stock I am not all that interested in. The company’s earnings declined last year; growth is expected this year, but it remains to be seen whether it will occur. I am, however, interested in the company’s preferred shares. Goldman Sachs’ Series ‘A’ preferred shares have a 7.3% dividend yield, which has been rising, as it is a floating rate bond, and interest rates have increased. These preferred shares have more than double the yield of GS common stock, and also, can be called by Goldman Sachs at $25, which is 8.8% higher than today’s stock price. So, if Goldman calls back the shares, investors will earn a decent capital gain from it. On the whole, there are far worse high yield stocks you could buy today than Goldman Sachs Series A preferred shares.
The post 3 No Brainer Bank Stocks to Buy Now for Less Than $1,000 appeared first on The Motley Fool Canada.
Should you invest $1,000 in Citigroup Inc. right now?
Before you buy stock in Citigroup Inc., consider this:
The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Citigroup Inc. wasn’t one of them. The 10 stocks that made the cut could potentially produce monster returns in the coming years.
Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $17,988!*
Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 35 percentage points since 2013*.
See the 10 stocks * Returns as of 1/24/24
More reading
Can You Guess the 10 Most Popular Canadian Stocks? (If You Own Them, You Might Be Losing Out.)
How to Build a Bulletproof Monthly Passive-Income Portfolio in 2024 With Just $25,000
Citigroup is an advertising partner of The Ascent, a Motley Fool company. Fool contributor Andrew Button has positions in Toronto-Dominion Bank. The Motley Fool recommends Goldman Sachs Group. The Motley Fool has a disclosure policy.
2024
