You Voted: Best Canadian Bank Stock

Does it matter which Canadian bank stock you own in your portfolio?

Apparently the answer is “yes” according to many readers who took some time over the last couple of weeks to answer my poll:

Which Canadian bank stock is the best to own?

  • Bank of Nova Scotia (BNS) (35%, 56 Votes)
  • TD Canada Trust (TD) (30%, 48 Votes)
  • Royal Bank of Canada (RY) (19%, 30 Votes)
  • Bank of Montreal (BMO) (7%, 11 Votes)
  • None of the above (6%, 9 Votes)
  • Canadian Imperial Bank of Commerce (CM) (3%, 7 Votes)

Total Voters: 161

Let’s take a quick look at what all these big banks offer, at a macro-level, before I ask some questions at the end.  They all:

  • Offer many account options (saving, chequing, TFSA, RRSP, RESP, etc.) for fees.
  • Offer a suite of mutual funds (with fees).
  • Provide loans to individuals, for residential and commercial purposes (with, you guessed it).

I’m sure you see a trend above.  Banks operate for few purposes other than to loan money to make money but you and I don’t have to play victim to them all the time – you can an owner of these great businesses instead.  Be an owner of what you consume.  It’s one of my investing rules of thumb.  You’ll never beat ‘em so you might as well join ‘em 😉

Here’s an overview of each big Canadian bank, including some information about their dividends:

Bank of Nova Scotia 

  • Market cap about $55 billion.
  • Arguably Canada’s most international bank – operations in more than 45 countries outside Canada.
  • Thousands of branches and ABMs in the Caribbean and Central America, Mexico, Latin America and Asia.
  • EPS over $4.50.
  • P/E ratio below 11.
  • Has paid dividends since 1832.  
  • Raised their dividend in 37 of the last 40 years.
  • Quarterly dividend of $0.52.
  • 5-year average dividend growth rate is over 6%.
  • Dividend yield is about 4%. 

Here’s what analysts are saying about this company:

A. Nasr – “He is underweight financials. Good results from BMO this morning. Canadian banks in general had a pretty big tailwind lending to Canadians. And will now be a headwind with debt levels being so high now. Definitely a good place for a long term outlook.”

M. Sprung – “Likes the international flavor. Canada’s most internationally diversified bank. Best for credit discipline. Fewer surprises in terms of loan losses. Sells for a premium but worth it because of stability it supplies to a portfolio.”

TD Bank

  • Market cap over $65 billion.
  • One of 10 largest banks in U.S. – serves more than 7 million customers U.S. Northeast, Mid-Atlantic, Metro D.C., the Carolinas and Florida.
  • Growing presence in U.K. and Europe.
  • EPS approaching $6.
  • P/E ratio around 12.
  • Has not missed a dividend payment to shareholders since 1857.
  • Quarterly dividend of $0.68.
  • 5-year average dividend growth rate is over 8%.
  • Dividend yield over 3.5%.

Here’s what analysts are saying about this company:

C. Poole – “One of 3 they hold and she would buy here. Yield is lower that the group. Very good retail franchise. Also likes RY and BMO.”

P. Harris – “Has done a great job of growing its US retail business. Bought companies with large footprints. Their Chrysler acquisition was an incredible deal.”

Royal Bank 

  • Still Canada’s largest bank by market cap, close to $70 billion.
  • Owns businesses in the U.K., U.S. and Caribbean – serve close to 15 million personal, business, public sector and institutional clients in over 55 countries.
  • EPS close to $3.
  • P/E ratio just over 15.
  • Has paid dividends since 1870.
  • Quarterly dividend of $0.54.
  • 5-year average dividend growth rate is close to 9%.
  • Dividend yield is about 4.5%.

Here’s what analysts are saying about this company:

J. Black – “Can look at this as a core quality holding. Good dividend. Solid business franchise. Exited the US. Growing global wealth management through some good acquisitions.”

P. Gardner – “A main pick. Likes because of stability of retail network. Can grow by acquisitions. A great margin business. He wants to see the growth strategy. TD has grown rates of return through the US. Wonders what their strategy is outside of Canada. Prefers TD.”

Bank of Montreal

  • Market cap about $37 billion.
  • BMO Financial Group is one of the largest banks in North America with almost $500 billion in assets.
  • Has operations under various groups, including BMO Harris Bank, based in Chicago, Illinois that has about 1,600 branches in the U.S.
  • EPS over $5.
  • P/E ratio around 11.
  • Has paid dividends since 1829.
  • Quarterly dividend of $0.70.
  • 5-year average dividend growth rate of 6%.
  • Dividend yield approaching 5%.

Here’s what analysts are saying about this company:

C. Poole – “One of the higher yield in the group. Nearly 4.8%. Increased presence in US will give them more scale. Tends to trade at a lower valuation.”

R. Meisels – “Probability of it breaking down through $54 is very high. The stock has been holding support all through 2010-2011 and is now starting to break below support. Banks have not been doing well. Could go significantly lower.”


  • Market cap about $30 billion.
  • CIBC has two major lines of business:  CIBC Retail Markets and Wholesale Banking- focused in Canada and around the world.
  • Serves close to 11 million clients in all, in Canada, Carribean, Singapore and Hong Kong.
  • EPS approaching $7.
  • P/E ratio around 11.
  • CIBC has not missed a regular dividend since its first dividend payment in 1868. 
  • Quarterly dividend of $0.90.
  • 5-year average dividend growth rate of 5%.
  • Dividend yield over 4.5%.

Here’s what analysts are saying about this company:

C. Stewart – “Holding up better than other banks because it has a larger retail franchise and is less dependant on capital markets than some others. As a safe haven in the Cdn banking space, probably a good place to look at.”

M. Sprung – “Over the years has made its share of mistakes so has always sold at a discounted multiple to the group. On an ROE basis it is probably one of the most profitable banks. In the last few years, they have taken significant steps to de-risk this bank. Yield of close to 5%.”

Other Canadian banks to consider for your portfolio (which were not included in my poll):

National Bank

Laurentian Bank

Canadian Western Bank

Interestingly enough, 9 votes said “none of the above” in my poll, which means folks didn’t like the “big 5” options I provided or maybe they don’t like any Canadian banks for direct stock ownership.  

Personally, I think Canadian banks should be part of any stock portfolio. I also think it doesn’t matter too much which one you own, given the entire sector moves in lock-step.  In the end, they all make money off you, off me and off others.  That’s their business.  Why not get something back in return in the form of dividends?  If you don’t own them directly, chances are your ETFs or your mutual funds do 🙂

What do you think of these poll results? 

If you voted, which one did you vote for? 

If you didn’t vote, which ones are the best to own? 

I look forward to your comments!

Mark Seed is the founder, editor and owner of My Own Advisor. As my own financial advisor, I've grown our portfolio from $100,000 to well over $500,000. Our next big goal is to own a $1 million investment portfolio for an early retirement. Come follow my saving and investing journey by subscribing to my site. Enter your email address: Delivered by Subscribe to My Own Advisor by Email

28 Responses to "You Voted: Best Canadian Bank Stock"

  1. Nice!

    I voted for Royal Bank on this poll. 🙂

    If your question had been, “which Canadian bank stock is the best to own for the long-run?”, I would have selected TD Bank.

    Over the past several weeks, I think RY has been undervalued based on their exit from US operations, and that markets have not fully reflected its real value.

    Long-term, I think RY is still a good position to have, but TD and BNS are by far my favorite two Canadian banks. As a dividend-oriented investor, it took me a while to get a position in TD because the bank generally offers less of a juicy yield cash flow wise, but I’m glad I have a position in it.

    LB really highlights how a company can have a low dividend payout ratio, but not necessarily be the best choice within a sector.

    Great post! I like how you used an online poll and taken your readers input to craft it.

    1. @TWC,

      Thanks for your comment!

      All in how you phrase the question eh?

      RY is definitely low in price. I wish I had some cash to invest!

      Regarding RY, I think you’ll see TD surpass RY in terms of market cap next year. I don’t yet have any position in TD, but would like one. By the end of 2012, I should have at least 3 bank stocks DRIPping, need RY and TD long-term to complete the set. LB or CWB will get bought out, maybe within the next couple of years. Just a hunch. Thoughts?

  2. Mark, I am sorry I missed your poll. I am so busy these days I can’t find time for keeping track of all the blogs’ posts. Anyway, I would have voted for Scotiabank. I like this bank, its products, customer service, etc. However, I also drip BMO and through my wife’s employee’s stock purchase plan, we have exposure to Canadian Western Bank. I wish TD had an OCP plan too, so I could add it to my DRIP portfolio. National Bank is on my wish list but for the future.

    Regarding your comment about Canadian Western Bank above I think the chances for now are small. CWB’s current growth target is to double its market cap within the next five years. I must say that some of the products it offers like the 3% TFSA savings account ( a cool rate for keeping “dry powder” and emergency cash reserve) are with no match among all the other banks I deal with. But who knows, perhaps you may end up being right.

    1. @Elemag,

      No worries, life gets busy and some nights, I have no idea how I finish these posts! Hopefully they make some sense….

      I like BNS as well. I too, also synthetically DRIP BMO. I too, wish I had TD. Just way too expensive night now, but the market seems to be bringing it back down (which is nice for purchase purposes).

      You’re probably right, and so is TWC, maybe the smaller caps like Canadian Western Bank and LB are not at any risk for purchase. CWB’s current growth target is to double its market cap within the next five years? Wow, that’s aggressive!

      Looking to buy anything if the market dips a bit?

      Thanks again for your contributions to the site! Keep ’em coming.

  3. I hold shares in RY, BMO and TD. I track BNS. I have never cared for CIBC. I have held BMO since 1983 (some 28 years) and on my orginal share purchase price I am earning 19.3% return. I have had RY since 1995 (some 16 years) and I am making some 28% on my original share purchase price. I have only recently invested in TD.

    When I bought BMO, I thought it was a very good one to have. However, I do not think that today I would buy it and prefer RY and TD.

    1. @Susan,

      Thanks for your comment.

      No holding in BNS? I’m surprised! Never CIBC eh? Geez, you and others feel this way but I don’t, as long as they pay dividends and rising ones at that I’m holding these guys. Am I crazy?

      That is some AMAZING return on BMO. Wow.

      I think many investors feel BNS and TD are the ones to own, which reflects the polling results. Any consideration for the smaller cap banks? LB? CWB?

  4. I missed the poll, but I would vote for TD. I own RY as well, and am working on some BNS. My new strategy is to buy the highest yielding bank each year, kind of like the dogs of the Dow and see how that works.

    Every year my bank sends me a letter saying they are increasing fees. Seeing as I don’t get charged any of them, I just smile and watch the profits increase. Can’t go wrong with Canadian banks!

    1. @Addicted,

      Thanks for checking in!

      No worries about missing the poll, I only had it up for a couple of weeks.

      I like your choices. I too, am working on BNS. I hope to have, by the end of the calendar year, enough BNS to DRIP synthetically.

      Interesting strategy! Are you going to post any performance metrics (regarding that strategy) on your blog? That would be kinda cool.

      I feel the same, new year, same letter, more fees. If you can’t beat ’em, own ’em! 🙂

    1. Hey ETFs,

      Thanks for your comment!

      I like XFN, I think it’s a good product but I wouldn’t hold this one alone, I’d ensure (personally again) to have some other Canadian equity ETFs with it, and some bonds for sure. Canadian financials, although great, there is risk.

      “The iShares S&P/TSX Capped Financials Index Fund seeks to provide long-term capital growth by replicating, to the extent possible, the performance of the S&P®/TSX® Capped Financials Index through investments in the constituent issuers of such index, net of expenses. The Index is comprised of securities of Canadian financial sector issuers listed on the TSX, selected by S&P using its industrial classifications and guidelines for evaluating issuer capitalization, liquidity and fundamental.”

      Top Holdings:

      BANK OF NOVA SCOTIA 15.35%
      BANK OF MONTREAL 10.19%

      I own about half of these top holdings directly, so I’m almost holding a proxy of XFN as it is. For that reason, I won’t buy XFN for my portfolio. That doesn’t mean XFN combined with a broad-market Canadian ETF like XIC wouldn’t be a bad choice, actually, it might be pretty good.

      You can find out about my favourite Canadian equity ETFs here:

  5. Great post and survey Mark.

    I’ll admit that I wouldn’t know the quality of one Canadian bank from another, but if you twisted my arm and made me blindly buy one of the above banks without researching, I’d probably buy the one that earned the least votes on your post. All of these businesses are solid, and this post would give me a peek into the least popular of the bunch. So I’d go for that one! Contrarian to the core. You know me!

    Great stuff Mark!


    1. Hey Andrew,

      Thanks for stopping by! No twisting your arm anymore, you’re an indexer all the way now 🙂 Kidding aside, I think all Canadian banks (big 5 and smaller fish) are good holdings, simply some have more risk, for sure, but overall, quality companies. How can you argue with firms that have paid dividends for > 150 years?

      Yes, I know you, contrarian to the core indeed!

      Thanks for the support!

  6. What an awesome overview of the big Canadian banks. Anyone else a little worried about how many of the banks are gobbling up US assets? Maybe this is a great opportunity, but I’m less and less sure we are not not witnessing some permanent change in the American economy.

    1. Geez, thanks MUM!

      I’m not too worried about Canadian banks moving into U.S. territory; some that is. There are plenty of customers, loans and fees to go around for the foreseeable future.
      Would you agree?

      Back to your comment, do you think these Amercian economic changes are permanent?

  7. @My Own Advisor

    I mailed the application for a (in cash) transfer of some of my mutual funds holdings to my Scotia iTrade Self-directed RRSP. Once I have the funds available, I will be looking south of the border for companies like PG, JNJ, PEP, MCD, etc. Also, I am planning on purchasing some shares of one of your favourite ETFs- VWO. Then, early next year I will transfer my BNS shares to the RRSP and my ENB to my TFSA and will continue to synthetically drip both. The focus for next year or so will be to accumulate enough shares for synthetic dripping of FTS, EMA, TRP, BMO and SU before they get transfered to my TFSA too. Of course, in my monthly or quarterly contributions I tend to favour the companies which are cheaper.

    I forgot to mention that I got both my son and daughter registered as shareholders of BNS and just in time for this month’s dividend. I will add more companies to their porfolios in the future months.

    1. @Elemag,

      I think you’re making a smart move by looking to load up on some dividend-payers in the U.S. Again, that’s just me. I plan on, eventually, holding about 10 U.S. dividend-paying stocks, all big cap boys like some of ones you mentioned above. I don’t have to go far for this research to start my investing, I just look at the top-holdings of VYM or HDV. I love ETF transparency!

      The reason for the U.S. payers? Maybe it’s just me but I don’t see the U.S. economy digging out of their mess for at least a decade. Maybe 20 years. Too much debt, too much consumerism and not enough production. The U.S. needs to become a producer not a consumer. In this light, returns from the U.S. will be low and the only way I think investors will be able to make gains/returns from the U.S. economy is by owning U.S. dividend-paying stocks that sell products to the world, not just at home. Anyhow, I digress….another post for another day!

      Back to you, I like VWO. I hope to own 100 shares by the end of this year. I hope to buy more over time. This guy is going to give me lots of diversified exposure from emerged markets.

      Geez, your Canadian-payers sound like my portfolio! I’m currently synthetically DRIPping EMA, TRP and BMO and over time, as TFSA room grows, those stocks are going in there. I know the downsides of having Canadian-dividend paying stocks in the TFSA but the upside is, I have tax-free dividends! Compounded over time, my TFSA is going become a great retirement income machine.

      I hope the same for you as well Elemag 🙂

  8. My Own Advisor

    Thank you, Mark! I totally agree with you about the economic reality and future of the USA. Forunately, all those big blue chip companies we both mentioned are so international that they will continue to deliver modest, yet steady grow of earnings and respectively dividend payments.

    I just went back and re-read your post regarding Barry- the dividend investor whom you had met online. Now his portfolio is one I’d like to match almost 100%. And just like you had written nicely- “the numbers speak for themselves”.

    Enjoy your weekend!


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