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Bank stocks were hit hard during the stock market sell-off in March. The COVID-19 restrictions resulted in an increase in default rates in the financial sector. Fantastic dividend payers are now selling at rock-bottom prices.

Canadian investors should consider buying the Bank of Nova Scotia (TSX: BNS) (NYSE: BNS) and Canadian Imperial Commercial Bank (TSX: CM) (NYSE: CM). These two stocks offer investors a dividend yield of 6.4% on their current market values.

The Bank of Nova Scotia is down 23.67% year-to-date. Likewise, the Canadian Imperial Bank of Commerce has lost 16.01% of its market value. For comparison: The S & P / TSX Composite Index The percentage change in level is 9.75%.

The underperformance of these assets versus the index suggests that these bank stocks may need to be revised upwards this year.

Bank of Nova Scotia

Analysts expect the Bank of Nova Scotia shares to see a significant upward trend. In fact, some analyst price targets estimate a price increase of up to 74%.

The Bank of Nova Scotia is sure to be a great stock. The price-earnings-ratio (PE) for this top bank stock is 9.21. Furthermore, the price-to-book ratio (PB) is 1.03 and the price-to-sales ratio (PS) is 2.47.

When a stock with a P / E of less than 20 trades with low PB and PS ratios, investors tend to classify the asset as a value stock. Better still, the Bank of Nova Scotia stock is technically no longer in the March downtrend and looks like its market value is about to rebound.

While investments are never without risk, bank stocks remain good buys even during the COVID-19 pandemic.

Canadian Imperial Commercial Bank

Analysts estimate that CIBC shares will rise by over 47%. These capital gains combined with the high dividend yield would be a great addition to any retirement provision portfolio, Tax Tax Free Savings Account (TFSA) or RRSP.

This top dividend payer also trades like a value stock. The PE ratio is 9.97 and the PB ratio is 1.08. The PS ratio is now only 2.43.

Bank stocks like the Canadian Imperial Bank of Commerce have high margins. The Canadian Imperial Bank’s profit margin is 25.24%. In addition, CIBC’s return on equity is 10.83%.

Should You Buy Top Bank Stocks?

Top banking stocks like CIBC and Bank of Nova Scotia pay high dividends. In addition, these dividends have an excellent track record. While there is no guarantee these banks will not cut dividends, their track record suggests that it is an unlikely outcome.

Canadian investors should also feel extra safe with Canada’s Imperial Bank of Commerce. Victor Dodig, the CEO of CIBC, made the following statement regarding the possibility of a dividend cut:

“I would say one thing that is incredibly important: The Canadian investors who invest in our banks rely on these dividends for income. And any reliable source of income we Canadians – and Americans, as well as our other shareholders who invest in our banks – can offer is incredibly important at a time when cash flow reduces fear. “

Although the Office of the Superintendent of Financial Institutions (OSFI) has asked banks not to buy back shares or raise dividends, CIBC shareholders can at least feel confident that the Board of Directors will not reduce their dividend payments.

This article represents the opinion of the author who may disagree with the “official” endorsement position of a Motley Fool Premium Service or Distributor. We are colorful! Questioning an investment thesis – including one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer. As a result, we sometimes publish articles that may not match recommendations, rankings, or other content.

The narcissist Debra Ray has no position in any of these stocks.

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