Key Points
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Banks provide essential financial products and services to consumers and businesses.
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The Great Recession highlighted the risks associated with bank stocks.
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Focusing on banks with strong dividend histories tends to be a winning strategy for long‑term investors.
The modern economy relies on banks for cash storage, loan financing, and a wide array of business services. Most people maintain at least one banking relationship, making exposure to the sector sensible for many investors. However, not all banks are equal. Savvy investors should prioritize financially sound institutions that consistently reward shareholders with reliable dividends, even during downturns.
The Great Recession as a Lesson
Several prominent U.S. banks were caught up in the housing‑finance crisis that triggered the Great Recession, including Bank of America (NYSE: BAC), Citigroup (NYSE: C) and Wells Fargo (NYSE: WFC). All three cut their dividends, and Wells Fargo also faced a scandal involving unauthorized account openings, leading to another dividend reduction in the early 2000s.
These banks remain viable, but other options may offer better risk‑adjusted returns. For instance, Goldman Sachs (NYSE: GS) experienced only a brief dividend interruption during the recession and emerged relatively resilient. While it provides robust investment and asset‑management services, its current valuation—approximately 2.9‑times price‑to‑book, above the five‑year average of 1.4—makes it relatively expensive, with a modest 1.8% dividend yield.
GS Dividend data by YCharts
More Compelling Choices North of the Border
Toronto‑Dominion Bank (NYSE: TD) and Bank of Nova Scotia (NYSE: BNS), commonly known as Scotiabank, present attractive alternatives. TD Bank offers a 2.6% yield, while Scotiabank’s yield stands at 3.7%, and neither cut dividends during the Great Recession. Both faced regulatory issues—TD with anti‑money‑laundering controls—but remained dividend‑stable.
Valuation-wise, TD Bank trades at a 2.5‑times price‑to‑book ratio versus a five‑year average of 1.5, and Scotiabank at 2.0 versus 1.3 historically. Their Canadian base subjects them to stricter banking oversight, encouraging conservative operations across diversified businesses that extend beyond Canada.
Canadian regulations have also created a few dominant banks with protected market positions, giving TD Bank and Scotiabank solid foundations. TD Bank’s growth is largely tied to the U.S. East Coast, providing long‑term expansion potential, especially as it deepens its investment‑banking capabilities. Scotiabank is shifting focus from Central and South America toward the Mexico‑Canada trade corridor and renewed U.S. exposure, presenting a sizable growth opportunity.
Strong Balance Sheets and Reliable Dividends
All banks highlighted are well‑capitalized today. Among U.S. banks, Goldman Sachs survived the recession best, but its current premium valuation reduces its appeal relative to the higher yields offered by TD Bank and Scotiabank. Both Canadian banks are reasonably priced, possess diversified operations, and have solid growth prospects in the United States.
Investors seeking stable, dividend‑rich bank exposure may find TD Bank and Scotiabank compelling additions to a portfolio.
Should You Buy Goldman Sachs Stock?
Goldman Sachs remains a strong institution, yet its higher price‑to‑book multiple and lower dividend yield suggest that other banks may offer better risk‑adjusted returns for long‑term investors.
*Returns are based on historical data as of July 2, 2026.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
