POSTED ON APRIL 11, 2023 BY STEPH
I love bank stocks!
“Exploring the Ups and Downs of Investing in Bank Stocks”
In this blog post, we’ll explore what Canadian bank dividend stocks are, their advantages and disadvantages, and some of the top Canadian bank dividend stocks to consider.
Banks are essential to the functioning of the Canadian economy and have a stable, regulated business model that can provide consistent dividends over time.
Bank dividend stocks are a popular investment option for many Canadian investors looking for stable and generous income stream of dividends for any investing account.
What are Canadian Bank Dividend Stocks?
Canadian bank dividend stocks are stocks of Canadian banks that pay out a portion of their profits to shareholders as a dividend.
Canadian banks typically have a stable, predictable business model, making them a reliable source of dividends.
Canadian banks are required to maintain a certain level of reserves to ensure their solvency and meet regulatory requirements.
Bank Dividend stocks work great for non registered accounts as they are preferred taxing with the dividend credit. Most Canadians will pay very little tax on the dividends received. They can also be put into your RRSP or your TSFA.
Advantages of Canadian Bank Dividend Stocks
Canadian banks have a stable business model and are required to maintain certain levels of reserves, making their profits and dividends relatively reliable and predictable. This can make them an attractive dividend option as well as long term growth.
As the Canadian economy grows, so do Canadian banks, and their profits can increase over time thus providing investors with a well-rounded investment.
Disadvantages of Canadian Bank Dividend Stocks
Sensitivity to interest rates! Yikes this is where we are now.
Canadian banks make money by lending out money at higher interest rates than they pay on deposits. When interest rates rise, Canadian banks’ profits can increase, leading to higher dividends. (Well.. this is good news!)
Conversely, when interest rates fall, Canadian banks’ profits can decrease, which will eventually lower dividend payouts.
During times of economic hardship, Canadian banks may experience lower profits and potentially cut or eliminate their dividends. This can lead to a decline in the stock price and lower returns for investors. (should we be concerned?)
My top favorite Bank Stocks.
- Royal Bank of Canada (RY) – Royal Bank of Canada is one of the largest Canadian banks and has a long history of paying dividends. The current yield is around 3.8%
- Toronto-Dominion Bank (TD) – Another large Canadian bank that has a long history of paying dividends. The current yield is around 3.9%.
- Bank of Nova Scotia (BNS) – Bank of Nova Scotia is one of the largest Canadian banks and has a solid track record of paying higher dividends. The current yield is around 4.6%. I like this one for the dividends but it’s share price has fallen over the last year.
As with any investment, it’s important to do your research and carefully consider your options before making any decisions. These views are solely my expressions and are not meant to be financial advice. Please do your own research.
