These three Canadian bank stocks are flashing buy signals

A savage sell-off of Canadian banking stocks have left these dividend-paying lenders looking cheap and attractive to long-term investors

Vikram Barhat 6 February, 2019 | 6:00PM

Canada’s financial industry appears to be dusting itself off after a spectacular double-digit fall last year sparked by a savage sell-off of Canadian bank stocks.  The weakness, however, brought valuations down making some of these stocks the cheapest in a decade. Add enticing dividends to the mix and these lenders become attractive buys for long-term investors. On average, major Canadian banks are each paying a nearly 4% dividend, far exceeding bond yields that have dropped below 2% this year.

There is plenty going for these banks. For a start, they operate in an oligopoly that holds nearly 90% of the banking deposits.

Also, as a group, they have clocked robust profit growth and have consistently raised dividends despite the sector and economic turmoil. History shows that resilient banks have always bounced back from bouts of weakness.

Robust capital reserves, growing revenue and profits, solid balance sheets, and diversified businesses and global presence conspire to create a long runway of growth for these lending institutions.

Investors looking for attractive prospects in their own backyard will find compelling options in the following names trading meaningful below their fair value, according to Morningstar equity research.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Bank of Montreal72.82 CAD2.74
Royal Bank of Canada93.08 CAD1.98
The Toronto-Dominion Bank59.92 CAD2.01

About Author

Vikram Barhat

Vikram Barhat  Vikram Barhat is a Toronto-based financial writer specializing in investing, stock markets, personal finance and other areas of the financial services industry. He also writes for CNBC, BBC, The Globe and Mail, and Toronto Star.

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