3 Bargains in the Banking Industry

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS), National Bank of Canada (TSX:NA), and Canadian Western Bank (TSX:CWB) are three of the top value plays in the banking industry. Which should you buy?

| More on:
The Motley Fool

As value-conscious investors, we are always on the lookout for high-quality stocks that are on sale, and the recent downturn in the market has created a plethora of opportunities. Let’s take a look at three bank stocks that have fallen over 10% year-to-date, and are now trading at very inexpensive valuations compared with both their five-year and industry averages, so you can decide which would fit best in your portfolio.

1. Bank of Nova Scotia

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is the third-largest bank in Canada, with approximately $863.1 billion in total assets. Its stock has fallen over 10% year-to-date, including a decline of over 7% in the last three months.

At today’s levels, Bank of Nova Scotia’s stock trades at just 10.6 times fiscal 2015’s estimated earnings per share of $5.59 and only 9.9 times fiscal 2016’s estimated earnings per share of $6.03, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 11.7 and the industry average multiple of 12.1.

In addition, Bank of Nova Scotia pays a quarterly dividend of $0.70 per share, or $2.80 per share annually, giving its stock a 4.7% yield. Investors should also note that it has increased its dividend for five consecutive years.

2. National Bank of Canada

National Bank of Canada (TSX:NA) is one of the 10-largest banks in Canada, with approximately $215.6 billion in total assets. Its stock has fallen over 15% year-to-date, including a decline of over 11% in the last three months.

At today’s levels, National Bank’s stock trades at just 8.9 times fiscal 2015’s estimated earnings per share of $4.73 and only 8.6 times fiscal 2016’s estimated earnings per share of $4.89, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 10.2 and the industry average multiple of 12.1.

Additionally, National Bank pays a quarterly dividend of $0.52 per share, or $2.08 per share annually, which gives its stock a 5% yield. It is also important to note that the company has increased its dividend for five consecutive years.

3. Canadian Western Bank

Canadian Western Bank (TSX:CWB) is one of the largest banks in Canada’s four western provinces, with approximately $22.3 billion in total assets. Its stock has fallen over 21% year-to-date, including a decline of over 7% in the last three months.

At today’s levels, Canadian Western Bank’s stock trades at just 9.9 times fiscal 2015’s estimated earnings per share of $2.61 and only 9.5 times fiscal 2016’s estimated earnings per share of $2.72, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 13.7 and the industry average multiple of 12.1.

In addition, Canadian Western Bank pays a quarterly dividend of $0.22 per share, or $0.88 per share annually, giving its stock a 3.4% yield. Investors should also note that it has increased its dividend for 23 consecutive years.

Which of these banks belong in your portfolio?

Bank of Nova Scotia, National Bank of Canada, and Canadian Western Bank are three of the top value plays in the banking industry today, and all have the added benefit of dividend yields of over 3%. Foolish investors should strongly consider making one of them a core holding.

Should you invest $1,000 in The Bank of Nova Scotia right now?

Before you buy stock in The Bank of Nova Scotia, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and The Bank of Nova Scotia wasn’t one of them. The Top 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 $24,927.94!*

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 30 percentage points since 2013*.

See the Top Stocks * Returns as of 6/23/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned.

More on Dividend Stocks

diversification and asset allocation are crucial investing concepts
Dividend Stocks

1 Stellar Canadian Stock Down 28% From its All-Time High to Buy and Hold for Decades

CN is starting to look attractive for buy-and-hold investors. Here's why.

Read more »

Piggy bank on a flying rocket
Dividend Stocks

I’d Max Out my TFSA With This 5.2% Monthly Dividend Powerhouse

Northland Power is a top dividend stock that's perfect for your TFSA, as its earnings are expected to ramp up…

Read more »

investor looks at volatility chart
Dividend Stocks

3 TSX Value Stocks to Buy When Everyone Else Is Selling

Stop hiding and start buying, especially these three top dividend stocks everyone else is selling.

Read more »

dividend stocks are a good way to earn passive income
Dividend Stocks

I’m All-In on This 5.8% Dividend Stock and Here’s Why

Income-focused investors should take a closer look at Scotiabank, especially if the stock dips meaningfully.

Read more »

a person watches stock market trades
Tech Stocks

The Smartest Tech Stocks to Buy With $200 Right Now

Two price-friendly tech stocks are the smartest buys in TSX's high-growth sector today.

Read more »

Hourglass and stock price chart
Dividend Stocks

1 Magnificent Canadian Energy Stock Down 22% to Buy and Hold for Decades

This Canadian energy giant has increased its dividend annually for the past 25 years.

Read more »

ETFs can contain investments such as stocks
Dividend Stocks

I’d Put My Entire TFSA Into This 3.5%-Yield Dividend Giant

I'd invest my entire TFSA in the BMO Canadian Dividend ETF (TSX:ZDV).

Read more »

Paper Canadian currency of various denominations
Dividend Stocks

3 Canadian Dividend Knights Trading at Bargain Prices

Dividend knights don't just offer dividends year after year; they've grown them for decades.

Read more »