Look to Canada for Stable Bank Stocks

Looking at the wasteland of the US financial markets, it's pretty hard to find a compelling bank stock to sink your hard earned investment collars into. Commercial banks like Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC) have plenty of issues staring them in the face, the least of which is the state of the residential real estate market, and the institutional players like Goldman Sachs (NYSE:GS) and JP Morgan (NYSE:JPM) seem more content with snubbing their nose at government regulators and paying out huge bonuses than returning shareholder value.

To have a diversified portfolio, you should have some exposure to banking and financial stocks, but in the current economic environment, it isn't easy to find good stocks. So where should you look for good bank stocks? Have a look at our neighbor to the North, Canada, which has remained decidedly less impacted than the US by the economic downturn and retreat of the capital markets, where a number of solid companies are worth a look.

Take a look at these three solid banks north of the border - Toronto Dominion (NYSE:TD), Bank of Montreal (NYSE:BMO), and Royal Bank of Canada (NYSE:RY). All three have moderate P/E ratios, solid Earnings Per Share (EPS) ratios, and pay a respectable and consistent dividend. These three companies also generally have the positive attribute of having a stronger balance sheet than their US counterparts.

Though not totally immune to the financial shenanigans that took place here in the US, Canada has stronger rules and regulations over its banking entities, not allowing them the kind of overexposure to risky investments and over-leveraged balance sheets that led to trouble here in the US. While this level of regulation can hinder a banks' growth, hindsight does seem to indicate that it was prudent to have during times of economic crisis.

This isn't a blanket statement to immediately go out and buy these stocks, just recommendations of alternatives to US bank stocks that are worth looking further into. You should still research them thoroughly before adding them to your portfolio, and understand that they still have inherent market risks and company specific risks.

Despite overwhelming negative current events, financial stocks, and more specifically bank stock should be part of any well balanced portfolio. If you're looking for a bank stock to add to your portfolio, consider looking outside the United States, more specifically at Canada where Toronto Dominion, Bank of Montreal, and Royal Bank of Canada are worth a second look.