2 High-Yield Bank Stocks That Are Dirt Cheap

Bank stocks like Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) have been hit hard, which means investors should be thinking about a value add in April.

| More on:

In the middle of March, I’d discussed the bloodbath for bank stocks and why they looked on sale. There has been some promising movement in the broader market. However, there is still some uncertainty surrounding Canadian banks. The BMO Equal Weight Banks Index ETF (TSX:ZEB), which aims to track the six largest financial institutions in the country, has seen its shares fall 13% month over month.

There is concern over the broader impacts of the shutdown on Canada’s banks, especially if the lockdowns stretch into June and beyond. The Canadian household debt-to-income ratio has held steady above 170%. The government is providing some support in the form of the CERB, but there will still be significant financial damage for many citizens this year.

But there are signs that the curve may be flattening in Canada and in key parts of the United States. Denmark, Austria, and other European countries have indicated that they will look to normalize conditions gradually in the weeks to come. Today, I want to look at two bank stocks that boast nice value while also providing top shelf income. Let’s dive in.

Two bank stocks with hefty dividends

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is the fifth largest of the top Canadian bank stocks. It shares have dropped 14% month over month as of close on April 7. The stock was only up marginally week over week at the time of this writing.

Investors will have to wait until late May to get a glimpse of CIBC’s second-quarter results. CIBC invested in its real estate portfolio to start 2020 with its sights on becoming a leader in this area once again. However, the COVID-19 pandemic and the economic chaos that has followed has seemingly derailed those ambitions for now.

CIBC last increased its quarterly dividend payment to $1.46 per share. Right now, this represents a tasty 7% yield. For investors chasing income, CIBC is still one of the best bank stocks you can buy.

Scotiabank (TSX:BNS)(NYSE:BNS) has seen its stock drop 15% over the past month as of close on April 7. It is sometimes referred to as “the international bank,” which makes it a unique pick among Canada’s top bank stocks. The global outbreak means that certain economies may gear up at a different time. This week, for example, China ended the +70-day lockdown in Wuhan, where many conclude the COVID-19 outbreak originated from.

Its second-quarter 2020 results are also expected to be released late next month. Recently, Scotiabank chief economist Brian Porter said that the bank was more than strong enough to weather the pandemic and its impacts. He pointed out that Latin America, where Scotiabank boasts a large footprint, has governments with low debt-to-GDP ratios going into this crisis. This grants these states more leeway to respond.

The bank last paid out a quarterly dividend of $0.90 per share. This represents a strong 6.5% yield. Scotiabank and CIBC both possess immaculate balance sheets and are more than able to make it through this crisis on solid footing. This is why these bank stocks are worth targeting right now.

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 Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA.

More on Bank Stocks

Man data analyze
Bank Stocks

Is TD Bank Stock a Buy, Sell, or Hold for 2025?

TD stock has underperformed its large Canadian peers this year. Will 2025 be different?

Read more »

dividends can compound over time
Bank Stocks

Is TD Bank Stock a Buy for Its 5.2% Dividend Yield?

TD Bank stock offers a rare 5.2% dividend yield—can it rebound from challenges and reward contrarian investors? Here's what to…

Read more »

analyze data
Bank Stocks

Is BMO Stock a Buy for its 4.7% Dividend Yield?

Bank of Montreal is up 20% since late August. Are more gains on the way?

Read more »

calculate and analyze stock
Bank Stocks

4% Dividend Yield? I Keep Buying This Dividend Stock in Bulk!

If you find the perfect dividend stock, you never have to worry about investing again. And that's what you get…

Read more »

Investor reading the newspaper
Bank Stocks

Is Canadian Imperial Bank of Commerce Stock a Good Buy?

Let's dive into whether Canadian Imperial Bank of Commerce (TSX:CM) is a top buy, sell, or hold right now.

Read more »

Man data analyze
Bank Stocks

Where Will BNS Stock Be in 3 Years?

Bank of Nova Scotia is primed for growth with a bold U.S. expansion, steady dividends, and a value focus that…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Stocks for Beginners

TFSA 101: Earn $1,596.60 per Year Tax-Free!

Investors don't have to buy some risky stock if they want tax-free high income. Instead, buy this top stock instead.

Read more »

data analyze research
Bank Stocks

TD Bank: Buy, Hold, or Sell Now?

TD is underperforming its large Canadian peers this year. Is a rebound on the way?

Read more »