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:
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts