The Canadian bank stocks are nowhere near being out of the woods as we enter a new year. Undoubtedly, the same slate of worries and headwinds that plagued them for most of 2023 (and 2022) will still be on the table in 2024.
As the quarters gradually flow in for the year, many investors will surely be biting their nails, hoping that the results come in just a tad better than feared. With expectations now pretty realistic (or, dare I say, slightly conservative), I believe the bank stocks themselves can do well even in the face of potential earnings pressures.
Bank stocks could be a wild ride, but don’t sleep on them in 2024
Remember, whenever you have low expectations, it becomes easier to move higher, even if the numbers themselves are pretty ugly. If quarters don’t end up as horrendous as feared, I’d look for the bank stocks to add to their recent fourth-quarter gains.
At the end of the day, there aren’t too many raging bulls in their stocks. For that reason, I believe valuations continue to be decent for investors seeking an entry point for any new money (perhaps coming from a 2024 Tax-Free Savings Account contribution?).
In this piece, we’ll check out two bank stocks that I’ll probably consider buying in the near future, as their dividends remain respectable in this high (but likely falling) interest rate world. Without further ado, let’s get into two Canadian bank stocks that may be able to fight their way higher in a year that’s sure to be full of difficulty.
TD Bank
The stage for 2024 doesn’t seem to be set for new highs. That said, if you’re a long-term thinker who would be content collecting the dividend (currently yields 5% on the button), I’m not against jumping in right here.
In fact, it’d be quite a bold contrarian move to do so given TD Bank (TSX:TD) stock has seen quite a lack of action in recent months. With shares seemingly stuck in the low $80 range (currently priced at $81 and change per share), value investors can inch their way into the name gradually. Moving ahead, I’d look for money-laundering headlines (and the penalties associated) to pass, as more focus is drawn on the coming quarterly results.
It’s a tough hill to climb for TD, but with Chief Executive Officer Bharat Masrani running the show, I think the bank can begin to trend higher again alongside the rest of the pack. At the end of the day, TD stock is a wonderful financial that’s doing its best to make it through what hopefully is the last of the industry-facing headwinds.
Royal Bank of Canada
Royal Bank of Canada (TSX:RY) isn’t just Canada’s biggest bank; it’s one of the bluest blue chips in the country. Unlike TD stock, shares have some robust newfound momentum behind them, now up around 19% from 52-week lows. At 12.5 times trailing price to earnings, you’re getting a fair price for one of the most established banks on the planet.
As inflation is tamed, rates begin to retreat, and Canada’s recession comes to pass, look for RY stock to target new highs, perhaps by the conclusion of 2025. In the meantime, there’s a nice dividend (4.21% yield) to enjoy while you wait for things in the banking scene to normalize for the group after a rocky past several years.
If you prefer quality over all else, it’s wise to stick with RY stock. Should shares make a return to the $115 range, I may consider buying the dip. For now, however, I like TD stock just a tad more.
