3 Top Bank Stocks to Buy This Summer

The Canadian economy has continued to rebound, which should inspire investors to snatch up bank stocks like TD Bank (TSX:TD)(NYSE:TD).

| More on:

The Canadian economy has been on the rebound since the last months of 2020. That rebound has kicked into overdrive in 2021, as the country has been able to broadly reopen. Ontario, Canada’s most populous province, just entered step two of its reopening plan. In April, I’d discussed why bank stocks were perfect targets during this recovery.

Here’s why TD Bank is still one of my favourites

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is the second-largest financial institution in Canada. Shares of TD Bank have climbed 21% in 2021 as of early afternoon trading on July 5. The bank stock is up 43% from the prior year.

In Q2 2021, TD Bank built on its strong performance to kick off the year. One of the key drivers for the increase in profit has been the decline in provisions for loan losses. This has been true for TD Bank’s peers as well. The bank delivered $3.7 billion in net earnings in the second quarter — up 144% from the prior year. On an adjusted basis, earnings per share rose to $2.04 compared to $1.76 in Q2 2021.

Shares of this bank stock still possess a favourable price-to-earnings ratio of 11. Moreover, it offers a quarterly dividend of $0.79 per share. That represents a 3.6% yield.

This bank stock is worth snatching up in July

Bank of Montreal (TSX:BMO)(NYSE:BMO) is another top bank stock that boasts a strong footprint in the United States. Shares of BMO have increased 32% in the year-to-date period. The stock has surged 73% year over year.

BMO saw its provisions for credit losses sink to $60 million compared to a whopping $1.11 billion in the prior year. Adjusted net income rose to $2.09 billion, or $3.13 on a per share basis — up from $715 million, or $1.04 per share, in Q2 2020. BMO was also bolstered by a return to profit in its Capital Markets division. Strong market performance powered earnings for BMO and its peers in this space. Overall, these results managed to surpass analyst expectations.

This bank stock last had a P/E ratio of 14. The last year of strong momentum has put its shares in less-favourable value territory compared to its peers. BMO offers a quarterly dividend of $1.06 per share, which represents a 3.3% yield.

One more bank stock to buy today

Scotiabank (TSX:BNS)(NYSE:BNS) is a noteworthy Canadian bank stock due to its international exposure, especially in Latin America. Back in late 2019, I’d suggested that this was a big reason to scoop up Scotiabank. Unfortunately, this region was hit hard at the peak of the COVID-19 pandemic in 2020. A recovery is underway, but it will likely be more gradual than top nations in the developed world.

The bank reported net income of $2.46 billion, or $1.88 per diluted share, in the quarter — up from $1.32 billion, or $1.00 per diluted share, in the previous year. Shares of this bank stock last had a solid P/E ratio of 12. It offers a quarterly dividend of $0.90 per share. This represents a 4.5% yield.

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 stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA.

More on Investing

gift is bigger than the other
Investing

The Best Canadian Stocks to Buy With $5,000

These Canadian companies have solid growth prospects and the ability to deliver profitable growth even at a large scale.

Read more »

woman looks out at horizon
Stocks for Beginners

3 Beginner-Friendly Stocks Perfect for Canadians Starting Out in November

Are you looking for some of the best beginner-friendly stocks to line your portfolio? Here's a trio of picks to…

Read more »

A meter measures energy use.
Dividend Stocks

Is Fortis Stock a Buy, Sell, or Hold for 2025?

Fortis has increased its dividend annually for the past five decades.

Read more »

analyze data
Dividend Stocks

3 Dividend Stocks That Are Screaming Buys in November

Here are three top dividend stocks long-term investors won't want to ignore during this part of the market cycle.

Read more »

analyze data
Energy Stocks

Buy 8,850 Shares of This Top Dividend Stock for $2,000/Month in Passive Income

Let's do the math on what it would take to generate $2,000 a month in passive income from Enbridge (TSX:ENB)…

Read more »

senior relaxes in hammock with e-book
Dividend Stocks

Generate $175/Month in Passive Income With a $30,000 Investment

Dividend aristocrats offer reliability, and many of them also offer generous yields. With sizable enough discounts, these yields can become…

Read more »

dividends can compound over time
Dividend Stocks

Best Dividend Stocks to Buy Now for Canadian Investors

These three stocks would be excellent additions to your portfolios, given their solid underlying businesses, consistent dividend growth, and healthy…

Read more »

hand stacking money coins
Investing

A Few Years From Now, You’ll Wish You’d Bought This Undervalued Stock

A modestly undervalued stock with decent growth momentum may not be compelling to some investors. However, its business model and…

Read more »