best canadian bank stocks to buy 2011

best canadian bank stocks to buy 2011 : Bank stocks have typically been one of the best ways to play an economic recovery, but investors know that banking stocks have been a roller coaster ride of late. Between the negative headlines and the financial regulation overhang “investing in U.S. banks is like getting a never-ending root canal with no aesthetic” noted Jim Cramer on yesterday’s Mad Money show.

Cramer recommends that conservative investors take a look at Canadian bank stocks that offer much less headline risk.

The Canadian economy is growing faster than the U.S. It has lower unemployment. Their housing market has already rebounded. And the Canadian government is very pro-business. That results in Canadian bank stocks being “the most investable banks in the world” commented Cramer.

Dividend investors should note that not a single Canadian bank was forced to cut their dividend in the past few years (unlike Citigroup, JP Morgan Chase, Bank of American, etc.). In fact they all still offer healthy dividend yields along with less downside risk than American banks.

Here is a look at 5 Canadian bank stocks for conservative investors to consider:

The Bank of Nova Scotia
The Bank of Nova Scotia is an international growth play with 50% of their earnings coming from international markets. BNS shares also offer a current dividend yield of 3.2%, but Cramer recommends waiting for a pull back before buying Bank of Nova Scotia.

Bank of Montreal
Bank of Montreal has been buying “bad” banks and turning them into “good” banks. Cramer doesn’t consider BMO to be the highest quality bank stock, but it is an attractive dividend play with a 4.5% current yield.

Canadian Imperial Bank of Commerce
CIBC got hit hard in 2008 due to their exposure to the U.S. housing market. That followed Enron litigation in 2005 that ended up costing $2.5 billion. Despite all of that, CIBC never cut their dividend which currently yields 4.2%. Cramer called CIBC his “least favorite of the Canadian banks.”

Royal Bank of Canada
RBC is the largest Canadian bank and possesses an incredible strong brand. Cramer casts RBC as the Canadian version of Goldman Sachs or JP Morgan Chase. Royal Bank of Canada is the most risky stock on this list due to their expanding capital markets segment. RBC does offer a 3.3% current dividend yield, but their earnings can be volatile.

Toronto Dominion Bank
That brings us to Toronto Dominion Bank. Cramer views TD as “the best of the best” and the most bankable stock in Canada. The rest of the stocks on this list all offer nice dividend yields, but TD is the only Canadian bank to have actually increased their dividend payment since the recession. The stock now offers a current dividend yield of 2.8%.

Toronto Dominion is a conservative bank with a strong balance sheet. TD is also leveraged to the rising commodity prices given their exposure in Ontario.

What may surprise some investors is that TD is also one of the best ways to play the U.S. recovery. Toronto Dominion acquired Commerce Bank in 2008 and just recently bought Chrysler Financial which Cramer believes they got for a steal.

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