Passive Income: 3 Bank Stocks With Yields Over 5%

Bank sign on traditional europe building facade

Are you looking for passive income? If so, you may want to consider investing in Canadian bank stocks. That might sound ridiculous after this month’s U.S./European banking drama, but Canadian banks are a whole other beast entirely. Canada has some of the strictest financial regulations in the world. For example, our government requires that banks have CET1 ratios of 11%, which means that 11% of total assets (weighted by risk) has to be cash and equity. That’s among the strictest capital ratios required by law anywhere on earth.

Banks can be great investments when the government doesn’t let the banks get away with too much nonsense. Thankfully, in Canada, our government does not let too much mischief go on, making Canada’s banks pretty viable investments. In this article, I will explore three high yield bank stocks that could add some much needed passive income to your RRSP or TFSA.

Bank of Nova Scotia

The Bank of Nova Scotia (TSX:BNS), hereafter referred to as “Scotiabank,” is an internationally diversified Canadian bank. It is best known for having cast the widest net of all the Canadian banks, with operations as far afield as Asia, Latin America, and the Middle East. It is not the fastest growing of Canadian banks, but it does have a lot of geographic diversification.

At today’s prices, Scotiabank stock yields 6.3%. That’s among the highest yields you’ll find with Canadian banks. Partially, this is due to BNS stock having delivered worse performance than many other Canadian banks over the last decade. It has been involved in money laundering scandals, among other things. Still, BNS stock has a high yield today. If you feel like bargain hunting, BNS might be the pick for you – just remember it’s not quite as safe as some of the other Canadian banks.


The Canadian Imperial Bank of Commerce (TSX:CM) is one of Canada’s more domestic-oriented banks. Its foreign operations are minimal, as is its growth. Over the last five years, CIBC has only grown its revenue by 5.85% per year. That’s a much lower growth rate than what has been observed in the other large Canadian banks. However, CIBC does have an 11.6% CET1 ratio and a 134% liquidity coverage ratio. The bank doesn’t look to be at risk of a bank run or any other such crisis. Therefore, it’s a relatively safe 6% yield you can add to your portfolio to up your passive income.

U.S. Bancorp

U.S. Bancorp (NYSE:USB) is the one American bank on this list. U.S. banks generally don’t have yields as high as that of their Canadian peers, but this one does: with a 5.5% dividend yield, it is truly gushing with passive income.

Why does U.S. Bancorp have a higher yield than many of its peers?

It’s not because of risk: USB recently passed the Federal Reserve Stress Test with flying colours. It seems that USB is being treated as risky, being sold off by investors, which is driving the dividend yield higher. USB is not a small bank, but it’s not a giant either. So, it may have been hit by the “regional banking” concerns that emerged this month. Nevertheless, the Federal Reserve thinks that USB is pretty safe. So, its stock may be worth a look.

The post Passive Income: 3 Bank Stocks With Yields Over 5% appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Bank of Nova Scotia?

Before you consider Bank of Nova Scotia, you’ll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in March 2023… and Bank of Nova Scotia wasn’t on the list.

The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 22 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks
* Returns as of 3/7/23

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Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy.

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