8 Best Canadian Bank Stocks To Grow Your Portfolio in 2022

Canadian bank stocks are the top drivers of regular dividend income in many DIY investment portfolios.

In fact, a quick search for the best dividend stocks or monthly dividend stocks shows that the best Canadian bank stocks on this list are well-represented.

Investors who have chosen a passive investing approach by using broadly diversified Exchange-Traded Funds (ETFs) will find that many of the best Canadian ETFs often include significant allocations for Canadian banks.

What are Bank Stocks?     

A bank is a financial institution that is licensed to accept deposits and lend money. Canadian banks also offer a variety of other services including investment banking and insurance.

Investors can buy shares in the stock of a publicly-traded bank, thereby becoming part owners of that bank.

Banks in Canada are regulated by The Office of the Superintendent of Financial Institutions (OSFI).

Best Canadian Bank Stocks

A list of the best bank stocks to buy right now is not complete without acknowledging the Big Five banks in Canada: RBC, TD, CIBC, BMO, and Scotiabank. These banks are among the world’s largest and safest banks.

In addition to the big five, I have also included a few large Schedule I Canadian banks like the National Bank of Canada, Canadian Western Bank, and Equitable Group Inc.

This list was put together by looking at how these banks fare based on a number of performance indicators including their dividend yield, dividend payout ratio, price-to-earnings ratio, and market capitalization.

These metrics are always changing, so do your research and due diligence before investing.

You can save on trading commissions when buying a bank stock by using a commission-free brokerage platform like Wealthsimple Trade ($25 bonus).

1. Royal Bank of Canada

The Royal Bank of Canada (symbol: RY.TO) is the largest bank in Canada based on its market capitalization. It has more than 17 million customers who are served by 86,000+ employees.

RBC’s operations extend beyond Canadian’s shores, with a plethora of financial services being offered and clients in the United States and 27 other countries.

The bank reported a 17% increase in its personal and commercial banking business revenues to C$2.23 billion in Q2 of 2022 and it has a decent dividend yield of 3.60%.

With a 157-year history and long-term record of stability, it is not difficult to consider the Royal Bank as one of the best Canadian bank stocks today.

I should not forget to also mention that RBC’s stock is a Canadian Dividend Aristocrat (as are many others on this list) which means that it:

  • Has 5+ consecutive years of increasing dividends
  • Is part of the S&P Canada BMI and trades on the Toronto Stock Exchange
  • Has a market cap of at least $300 million

Some key stats as of June 14, 2022:

  • Dividend yield: 3.60%
  • Dividend payout ratio: 39.86%
  • P/E ratio: 11.21
  • Market cap: $178.45 billion

2. Toronto-Dominion Bank

Toronto-Dominion Bank (symbol: TD.TO) is the second-largest bank in Canada by market capitalization. It has its roots going back to 1855 and is an amalgamation of the Bank of Toronto and The Dominion Bank.

TD has one of the widest reaches of a Canadian bank with over 26 million customers around the globe.

On the innovation side of things, TD is a leader in online banking technology with 15 million+ active online and mobile customers.

TD Bank Group reported a Q1 profit of $3.7 billion, an increase of 14% from a year earlier. For its Canadian retail banking operations, it saw an 11% increase in revenue, from $2.04 billion a year ago to $2.25 billion.

While TD stock’s price is slightly down year-on-year, it is doing much better than the broad market index. Also, its 3.98% dividend yield is competitive.

Some key stats as of June 14, 2022:

  • Dividend yield: 3.98%
  • Dividend payout ratio: 41.74%
  • P/E ratio: 11.57
  • Market cap: $130.89 billion

3. National Bank of Canada

National Bank (symbol: NA.TO) is the 6th largest charted bank in Canada and the largest bank in Quebec.

Like RBC and TD, the bank’s roots date all the way back to the 19th century.

While a majority of its revenues are from Quebec, National Bank has been expanding across Canada in recent times. It also has an international presence.

In its Q2 financial report, the bank saw revenue increases across its personal, commercial, and investment banking business.

Its current dividend yield of 4.08% is highly competitive.

National Bank appears primed for growth and it has recently seen a strong year-over-year increase in its U.S. and international operations.

  • Dividend yield: 4.08%
  • Dividend payout ratio: 32.41%
  • P/E ratio: 9.68
  • Market cap: $30.99 billion

4. Bank of Montreal

The Bank of Montreal (symbol: BMO.TO) is the fourth largest bank in Canada by market capitalization and a top-10 bank in North America.

With its history dating back to 1817, BMO also claims the title of “Canada’s oldest bank”.

Dividend investors would probably want to note that this bank has been making dividend distributions since 1829.

BMO has over 12 million customers around the globe, with 8 million in Canada and 2+ million in the U.S.

While BMO’s 15-year Compound annual growth rate (CAGR) of 5.7% and 5-year CAGR of 5.5% may not be best-in-class, the bank stands as the Canadian company with the longest dividend payment history.

  • Dividend yield: 4.23%
  • Dividend payout ratio: 26.23%
  • P/E ratio: 10.21
  • Market cap: $88.96 billion

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5. Canadian Imperial Bank of Commerce

CIBC (symbol: CM:TO) is one of Canada’s biggest banks with 10 million customers in Canada, the U.S., and the rest of the globe.

It has about 45,000 employees, 1,022 banking centres, and 3000+ ATMs.

The bank reported a 47.6% increase in net revenues in Q3 2021 (YoY) with a strong performance in its U.S. commercial banking and wealth management business.

It has a competitive 3.96% dividend yield, and a decent 8.9% 5-year CAGR (pre-provision pre-tax earnings – PPPT).

  • Dividend yield: 5.11%
  • Dividend payout: 43.52%
  • P/E ratio: 9.55
  • Market cap: $48.64 billion

6. Bank of Nova Scotia

Scotiabank (symbol: BNS.TO) is the third-largest bank in Canada by market capitalization. It was founded in 1832.

The bank has over 10 million customers in Canada and 15 million internationally who are served by 90,000+ employees.

It reported a quarterly earnings growth of 94.9% (YoY) in Q3 2021.

Stock price-wise, it has seen a decline of 5.67% year-on-year, but this is par for the current market (as of June 14, 2022).

If you are on the fence about Scotiabank, its dividend yield is one of the best for Canadian bank stocks at 5.11%.

  • Dividend yield: 5.11%
  • Dividend payout ratio: 46%
  • P/E ratio: 10.08
  • Market cap: $75.82 billion

7. Equitable Group Inc

Equitable Group Inc. (symbol: EQB.TO) owns Equitable Bank and EQ Bank. It was founded in 1970 and has over $42 billion in assets.

Equitable Bank primarily deals with residential and commercial mortgages, while EQ Bank is one of Canada’s most popular online banks.

The Equitable Group recently acquired Concentra Bank (Wyth Financial). This acquisition is expected to increase its asset base by $11.3 billion, making Equitable Bank the 7th largest bank in Canada.

It also reported a record net income of $292.5 million in 2021.

Equitable’s stock price is down over 17% YoY as of this update (June 14, 2022).

  • Dividend yield: 2.09%
  • Dividend payout ratio: 9.39%
  • P/E ratio: 6.81
  • Market cap: $2.07 billion

8. Canadian Western Bank

The Canadian Western Bank (symbol: CWB.TO) was founded in 1984 and has its headquarters in Edmonton, Alberta. Like Equitable Bank, it also owns an online-only subsidiary, Motive Financial.

Its stock price has declined by nearly 20% YoY.

CWB’s current dividend yield has increased over the last year and currently stands at 4.44%. It also has a long history of paying dividends and increasing its distributions over time.

  • Dividend yield: 4.44%
  • Dividend payout ratio: 31.13%
  • P/E ratio: 8.59
  • Market cap: $2.94 billion

How To Buy The Best Canadian Bank Stocks

These Canadian bank stocks are listed on the Toronto Stock Exchange and can be purchased using an online brokerage account.

If you are investing small amounts on a frequent basis, your trading commissions can spiral out of control.

This is where a no-commission brokerage (Wealthsimple Trade) or low-commission brokerage platform (Questrade or Qtrade) comes into play.

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Looking for the best Canadian bank stock to buy right now? This list offers some suggestions.

The price of bank stocks rises and falls as performance indicators and investor sentiment change. Compare the various metrics before investing and always think long-term.

8 Best Canadian Bank Stocks To Grow Your Portfolio in 2022

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Enoch Omololu

Enoch Omololu is a personal finance expert and a veterinarian. He has a master’s degree in Finance and Investment Management from the University of Aberdeen Business School (Scotland) and has completed several courses and certificates in finance, including the Canadian Securities Course. He also has an MSc. in Agricultural Economics from the University of Manitoba and a Doctor of Veterinary Medicine degree from the University of Ibadan. Enoch has a passion for helping others win with their personal finances and has been writing about money matters for over a decade. He has been featured or quoted in The Globe and Mail, Winnipeg Free Press, Wealthsimple, Financial Post, Toronto Star, CTV News, Canadian Securities Exchange, Credit Canada, National Post, CIBC, and many other personal finance publications.

His top investment tools include Wealthsimple and Questrade. He earns cash back on purchases using KOHO, monitors his credit score for free using Borrowell, and earns interest on savings through EQ Bank.

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