This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

4 Rock-Ribbed Canadian Bank Stocks

Stocks in this article: BNS TD BMO CM

BOSTON ( TheStreet) -- U.S. investors seeking high-yielding stocks of companies with earnings not likely to be decimated by Europe's economic contagion need look no further than our neighbor to the north and Canadian bank stocks, the best of which have 10-year returns double that of the S&P 500.

The structure of the conservatively run Canadian banking system puts a lid on risk, and its largest banks are, in effect, given protected status by the barriers to entry put in place by the government.

As a result, the nation's six largest banks collectively hold almost 90% of that nation's banking assets, giving them significant competitive advantages in the world's 10th largest economy.

So Canadian banks have been able to put up good earnings numbers and increase their dividends, thanks to their nation's relative economic health, in turn thanks to their government's fiscal conservatism.

And that shows up in their long-term returns, as the four stocks summarized below have 10-year annualized returns that range from 13.5% to 16.3%, vs. the S&P 500's 7% for the period.

In contrast, the deregulated U.S. banking sector has been struggling since 2007, dealing with a collapsing real estate market, investment losses and economic leadership that can't figure out which way is up.

Canadian banks have used this disparity and their healthy capital positions to make acquisitions on the cheap and have built their presence in the U.S. financial sector. Although those bets aren't likely to pay off for some time, they bode well for positive long-term results.

Ironically, even as Canadian economic growth is slowing, the nation's banks are likely to be buoyed by actions of U.S. banking regulators. S&P Capital IQ economist Alex Young said in a July 19 research note, that another round of quantitative easing (QE3) by the Federal Reserve "is likely to weigh on the U.S. dollar, boost commodities and hence the raw-material dependent, Canadian economy," via exports, three-quarters of which are U.S.-bound.

Here then are the four highest-rated Canadian bank stocks by S&P Capital IQ, ranked in inverse order of their 10-year annualized return:

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,678.70 +6.10 0.03%
S&P 500 2,057.09 +5.27 0.26%
NASDAQ 4,771.7630 +13.8840 0.29%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs