By Ian Salisbury

Investors looking for bank stocks delivering solid returns and dividends in 2026 may want to turn their attention to Canada.

While U.S. banks are gearing up to report first-quarter profits, their shares have struggled in 2026. While the S&P 500 is more or less flat for the year, financial stocks have declined 7% on average. They aren't offering investors much in the way of dividend yields either. The sector yields 1.6%, only slightly better than the broad market's 1.1%.

In Canada, it's a different story. All of the nation's "big five" banks have delivered positive total returns in 2026. While two -- Royal Bank of Canada and Bank of Nova Scotia -- have eked out gains of less than 1%, others are roaring ahead. Toronto-Dominion Bank is up 7%; Bank of Montreal, 11%; and the Canadian Imperial Bank of Commerce, 14%.

All five have delivered total returns of more than 50% in the past 12 months, according to FactSet. The group boasts comparatively generous yields too, ranging from Royal Bank of Canada's 2.4% to Bank of Nova Scotia's 4%.

After a difficult 2025, Canada entered the year with tepid expectations. Things have been looking a bit rosier lately. While the U.S., Mexico and Canada face a July 1 deadline to renegotiate their trilateral trade pact, the impact of tariffs has not been as bad as it could have been, noted Vanguard economist Adam Schickling in a recent outlook. At the same time, Canadian consumers have also fared better than predicted.

Even the war in Iran, which has shaken European and Asian economies, is something of a mixed bag for Canada. While higher oil prices eat into consumer budgets, Canada's resource-heavy economy has benefited from the surge in commodity prices. Energy and materials stocks make up 36% of the iShares MSCI Canada ETF, compared to just 5% of the S&P 500. All in all, Canadian stocks have returned just over 5% so far in 2026.

For investors looking for a blue-chip dividend payer, the Royal Bank of Canada is the nation's largest bank by assets ($1.7 trillion) and market capitalization ($240 billion.) It's got a large footprint in the U.S., with about 63% of revenue from Canada, 26% from the U.S. and 11% from other international operations.

Analysts expect solid profit growth of 10% to 12% over the next two years. The shares, which also boast a 2.4% dividend yield, trade at just 15 times 2026 earnings.

If you are looking for a riskier bet with a bigger yield, check out Bank of Nova Scotia, commonly known as Scotiabank. The stock, with a $90 billion market cap, is unusual among Canada's big banks for its historical emphasis on expanding in Latin America. That's given it something of the flavor of an emerging markets stock. Wall Street analysts forecast earnings growth of 18% in 2026 and 13% in 2027, according to FactSet. But the shares boast a lower price-to-earnings ratio (currently 12 times 2026 earnings) and a higher yield (4%) than competitors.

Lately, management has refocused its international exposure, giving the U.S. a bigger share of its attention. In August, Scotiabank acquired a 14.9% stake in KeyCorp for $2.8 billion. In March the company indicated it planned to increase the stake to just under 20%.

Write to Ian Salisbury at ian.salisbury@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

April 13, 2026 14:59 ET (18:59 GMT)

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