Best RRSP Stock for March 2021: CIBC
March is a great time to think about adding an RRSP to their portfolio to maximize long-term growth while generating tax savings. here’s why Canadian Imperial Bank of Commerce (TSX: CM)(NYSE: CM) is the perfect such stock today. I think you just can’t go wrong with this stock.
Profits soar as loan loss allowances decline
CIBC has been a better income among major Canadian banks, achieving significant profit growth in the first quarter of 2021. This is mainly due to a significant decrease in provisions for non-performing loans, customer bankruptcies, as well as double-digit returns in some of the units. keys.
CIBC’s net income reached the $ 1.63 billion mark for the three-month period ending Jan. 31, 2021, representing an increase of about 34% year-over-year. Additionally, CIBC EPS hit $ 3.58, beating analysts’ expectations of a solid $ 1.07.
In the same quarter, CIBC’s business and personal banking industry loan loss allowance decreased to $ 54 million. As a result, there was a 13% year-over-year increase in profits, amounting to $ 652 million. CIBC also performed well in its segment of the capital market which saw a 30% year-over-year increase to approximately $ 493 million.
It’s a perfect match: decent valuation and big dividends
I think Canadian bank stocks have done pretty well overall over the past year. But CIBC stocks definitely stand out from the crowd. With a yield of 3.9%, including dividends, this stock is clearly one step ahead of its peers. In fact, over the same period, his Big Six peers fell behind with a return of -1.5%.
CIBC’s returns include the catastrophic market collapses during February and March 2020. Since the March slowdown, its market price has risen by 70% – a fantastic return that has revised the average return of its peers by 66%.
In addition, CIBC’s dividend yield is 5.1%, which is higher than the average dividend yield of the other five major Canadian banks.
At the end of the line
Right now, CIBC’s consensus P / E is only 9.7, despite its strong performance. This has generally been the case for CIBC relative to its peers. However, I think banks could see a large scale revaluation to the upside if bond yields continue to rise. Improving net interest margins could provide the jet fuel these stocks need to get off the ground.
In addition, I believe that the profitability of Canadian banks will increase significantly this year on the aforementioned catalysts. As more loan loss provisions are removed, CIBC will look much more attractive in the coming quarters.
Indeed, now is the perfect time for investors to take a position in this stock, given the large room for improvement in the valuation of CIBC.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We are straight! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we post sometimes articles that may not conform to recommendations, rankings or other content. .
Foolish contributor Chris MacDonald has no position in any of the stocks mentioned.