Finding the perfect mix of investments for your portfolio can make a huge difference over the longer term. And Canada’s big banks are routinely noted as some of those great stocks to include in that perfect mix of investments. But what is the better bank buy for your portfolio?
Let’s look at Bank of Nova Scotia (TSX:BNS) and Canadian Imperial Bank of Commerce (TSX:CM) to determine which is the better bank buy right now.
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The case for Scotiabank
Scotiabank is the larger of the two banks being compared. What’s more, Scotiabank has a large international footprint. In fact, the bank is often referred to with a tagline of “Canada’s most international bank”.
That international presence includes a concentration in several Latin American countries, specifically Chile, Columbia, Mexico, and Peru. Those markets boast significant long-term growth potential, far outpacing growth opportunities in more developed markets.
Those four countries are part of a trade Bloc known as the Pacific Alliance. The group is focused on increasing trade and eliminating tariffs between its members. Scotiabank’s growing presence in the region has made it a familiar face and bolstered results.
In terms of income, Scotiabank offers investors an appetizing quarterly dividend. As of the time of writing, the stock offers a 6.20% yield, making it one of the better-paying dividends among its peers.
Over the trailing two-year period the stock has dipped 17%, but year to date the stock is up 8%. This makes it an intriguing option for long-term investors to pick up at a discount.
The case for CIBC
CIBC is one of the smallest of the big banks. For prospective investors, that smaller size means two important factors must be mentioned.
First, CIBC has a smaller international footprint over its peers, and certainly over Scotiabank. This means that CIBC investors won’t see the significant growth appeal that Scotiabank and some of its peers will see.
That’s not to say CIBC doesn’t have an international footprint. The bank does operate a growing segment within the U.S. market.
That smaller size and international footprint also means that CIBC is more concentrated around its domestic business, with a larger mortgage book compared to its larger peers.
That’s part of the reason why when inflation-induced interest rates started to rise, CIBC’s mortgage-heavy stock felt the pain more than its peers.
In fact, the stock still trades at a discount. As of the time of writing, the stock carries a P/E of 10.5 and trades down 13% over the trailing two-year period. More recently, however, the stock has performed well, showing a gain of 7% year to date.
Turning to dividends, CIBC offers investors a tasty 5.27% yield, which makes it one of the better-paying options to consider. And like Scotiabank, CIBC has provided annual upticks to that dividend without fail for years, with the one exception being during the pandemic.
The better bank buy is…
All stocks, even the most defensive carry some risk, and that includes both Scotiabank and CIBC. That being said, both banks offer a mature domestic arm and some international growth potential over the longer term.
In my opinion, both banks are great long-term options to consider, but Scotiabank has a slight edge over CIBC. That edge comes in the form of its larger international footprint and the higher yield offered to investors.
