Category Archives: Canadian Banks

Top Canadian Dividend Stocks – Is There Anything Good Besides Banks?

Top Canadian Dividend Stocks – Is There Anything Good Besides Banks?

If you are Canadian and you are looking to invest in dividend stocks, I am ready to bet my first born (not really!) that you have Canadian banks in your portfolio. Why? Because Canadian Banks have several awesome qualities any dividend investor is looking for:
– They are leaders in their industry (they are actually part of the most solid banks in the world).
– They are steady dividend payers (they can’t qualify as dividend aristocrats, but they are still pretty solid).
– They show steady revenue and profit growth.
– Competition is protected and legislated by strict government laws (which improve their chances of having steady financial results!).
– They pay more than 3% in dividends (and are now starting to increase their dividends again since 2008!).
And on top of that, some of them (think about National Bank: NA) are reporting great growth for what is considered a “mature” market.

But is there anything else to buy in Canada for dividend investors?

Oohhh… that’s a good question! I am also a big fan of Canadian banks…. But this is far from being enough if you want to build a solid investment portfolio.

Then you have 2 choices… high dividend yield stocks or solid companies with lower dividend yields?

If you take option #1, I suggest you take a look at the high yield Canadian dividend stockslist over at What is Dividend. The list was created by looking at the highest dividend yield stocks on the Canadian market with no other criteria. In other words, it is to be used at your own risk ;-) . However, I would take a closer look at the first stock on the list: CFX: Canfor Pulp Products. The stock is literally on fire and pays high dividends. On the other hand, I haven’t looked at their financials yet so I could not write much about it… I was just surprised when I looked at it this morning. First National: FN could be interesting as well as they work in the Canadian mortgage industry (all right, almost like a bank ;-0 ).

Option #2 look among the best Canadian Dividend Stocks

I maintain 2 lists over @ The Financial Blogger:

The difference between the 2 lists is the criteria. The top 10 is way more selective since it includes dividend growth over 5 years along with a dividend payout ratio under 60%. But since following 10 stocks is sometimes not enough, I have decided to add a second list quarterly with different criteria. My favorites among them? Here they are:

NPR – Northern Property Real Estate Investment Trust
I have already mentioned that Canadian REITs could be a great investment in your portfolio. Well, one of the strongest Canadian Dividend Stocks is Northern Property Real Estate Investment Trust. Strong with a P/E ratio under 12 (which has become rare on the Canadian market), NPR is ranked second in the Top 10 Canadian Dividend Stocks according to my list. The current dividend yield is 5.36% with a dividend payout ratio of 57%

SJR – Shaw Communications
As I mentioned in my article about sector investing, I am a strong believer of choosing the right industry before choosing the right stock. Anything that touches the internet and telecommunication these days will grow in my opinion. Technologies have never evolved so fast and all distributors will greatly benefit from it. The current dividend yield is 4.78% and dividend payout ratio of 69.85%

POW – Power Corp
I like Power Corp as it is a very well diversified financial corporation. Under its umbrella, let’s just mention Investors Group, Great West and London Life. I have worked in a partnership with this company and I can attest to the strength of their upper management. This certainly one of the most steady dividend stocks in Canada. The current dividend yield is 4.09% and dividend payout ratio of 61.32%


T – Telus
With employers opening up to home offices and communications across their multiple offices, I think that Telus can play an interesting role in managing telecommunication for companies. Along with that, the cell phone market seems unstoppable with the multiple gadgets we find on the market (iPhone, wifi tablets, BlackBerries, etc.). The current dividend yield is 4.28% and dividend payout ratio of 62.09%
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Play the Falling U.S. Dollar by Buying These 6 Canadian Banks – Seeking Alpha

Play the Falling U.S. Dollar by Buying These 6 Canadian Banks – Seeking Alpha

by Gerry Greer, Guest Editor
How do you protect wealth while the U.S. dollar falls? This is a concern for all American investors. The internet is full of sites promoting gold (GLD) or silver (SLV).
Gold has relative modest volatility. Silver’s fall going into the financial crisis was greater than gold’s. Since the market’s recovery started in the fall of 2009, both have seen maximum volatility in the range of about 20%. If the investment made is in the ETF, the security is bought and sold with the push of a button. If the investment is held in the physical metal, the sale is difficult in a timely manner.
Trading in gold or other currencies is a trade relative to one another. Currently the Canadian dollar is trading slightly higher than par versus the American dollar. The Canadian economy currently leads the G8 economies in growth. GDP growth in 2010 was 3.2%, with .8% in the 4th quarter. For Germany it was 4% on an annual basis, however the 4th quarter was .4%. The U.S. had annual growth of 2.8. Due to a downward revision in the 4th quarter, it is difficult to analyze the quarter to quarter numbers.
The 2010 unemployment rates were 7.4% for Germany, 7.8% in Canada and 9% in the U.S. The problem with Germany’s currency is having to share the currency with Greece, Spain, Portugal and Italy.
The Canadian banking system is dominated by 6 major banks, Royal Bank of Canada (RY), Bank of Montreal (BMO), Canadian Imperial Bank of Commerce (CM), The Bank of Nova Scotia (BNS), Toronto Dominion Bank (TD) and The National Bank of Canada (NA.TO).
In the recent recession there was not a single bank failure in Canada. The last bank failures were in 1985, two western regional banks both started in 1975 failed. The previous failure was in 1923.

As we wrote here, we also think Toronto Dominion is taking market share away from Bank of America (BAC).

All of the above mentioned banks pay excellent dividends. Listed below is a chart outlining dividends, yield, price to book, current price and analyst mean price objective.
Bank
Dividend in $ Canadian
Yield
Price to Book
P/E
Current Price $US
Price Objective
RY
2.00
3.35%
2.5
18
61.39
$65 CAN
BMO
2.80
4.56%
1.6
13
63.13
$68 CAN
CM
3.48
4.24%
2.5
14
84.43
$95 CAN
BNS
1.96
3.26%
2.6
16
61.89
$70 CAN
TD
2.64
3.18%
1.9
17
85.24
$93 CAN
NA
2.64
3.57%
2.0
12
73.83 CAN
$82 CAN
The Canadian banks are a relatively safe way to play an alternate currency, and get paid while you wait for the direction of the U.S. dollar to settle and offer a reasonable expectation for capital gains.

If you’re looking for American banks outdoing their peers, see our article on four names we like here.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Cramer’s Mad Money – 5 Banks With No Headline Risk (3/7/11) – Seeking Alpha

Cramer’s Mad Money – 5 Banks With No Headline Risk (3/7/11) – Seeking Alpha

Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Monday March 7.

Bank of Montreal (BMO), Bank of Nova Scotia (BNS), Canadian Imperial Bank of Commerce (CM), Royal Bank of Canada (RY), Toronto Dominion Bank (TD), JP Morgan (JPM), Goldman Sachs (GS)

With all the negative press about American banks and the overhang from Fin Reg, investing in domestic banks is “like getting a never ending root canal with no anesthetic,” said Cramer, who would look north to an economy that is growing faster than that of the U.S. and has lower unemployment. Canada did not have a serious financial crisis when the financial sector in the U.S. was reeling a few years ago. This is thanks to Canada’s relatively conservative lending policies that made bad loans rare. Not a single Canadian bank had to cut its dividend while the U.S. was in the depths of a recession.

Canadian banks are an “embarrassment of riches;” there are many good ones and investors need to decide where to put their money. Cramer discussed five Canadian banks worth watching.

Bank of Montreal (BMO) bought up small, “bad” banks and turned them into good ones. It is a value play with a 4.6% dividend. However, BMO is not Cramer’s favorite, since he doesn’t consider it the highest quality stock.

Bank of Nova Scotia (BNS) is an international bank with 50% of the company’s earnings coming from outside of Canada. However, Cramer would not recommend it so close to its 52-week high and would wait for a pullback.

Canadian Imperial Bank of Commerce (CM) got hit the hardest of the Canadian banks because of its exposure to the housing market and it lost $2.5 billion in Enron-related litigation. This bank has had a tough decade. This is Cramer’s least favorite Canadian bank.

Royal Bank of Canada (RY) is the largest Canadian bank and is like the Great White North’s version of Goldman Sachs (GS) or JP Morgan (JPM). RY is making major inroads by expanding capital markets, but Cramer thinks it is too volatile.

Toronto Dominion Bank (TD) is the most bankable of the Candian banks and it boosted its dividend recently by 8% after an 11 cent earnings beat. The company is a conservative, deposit-rich bank with a significant exposure to commodities. TD has a strong balance sheet and is growing its business in the U.S.; 25% of its revenues are from its southern neighbor. In fact, Cramer thinks TD might be one of the best ways to play the U.S. recovery. TD bought the $6.3 billion Chrysler acquisition, which will add 12 cents to TD’s earnings per share.

“If you want to own banks with no headline risk, go North, young man,” said Cramer.

CEO Interview: Alan McKim, Clean Harbors (CLH)

Natural gas has been taking a lot of heat lately as the media says the fracking procedure to extract the fuel might harm the environment. A good play on this story is a company that will clean up the mess made by extracting natural gas, Clean Harbors (CLH), which also played a leading role in the Gulf of Mexico cleanup last year. The stock is up 33% since Cramer got behind it in June and 7% since January. Bears worry that Clean Harbors won’t be able to duplicate last year’s performance, but the concern over fracking creates a whole new space for Clean Harbors. The company is already in the Marcellus shale and management has indicated the problems with fracking will be solved within a year.

Clean Harbors deals with various kinds of waste disposal and has 65% share of the nation’s incinerators and 60% of the landfill space. Barriers to entry are very high and there have been no new incinerators built in the past 15 years. A full 85-90% of sales are from long term contracts, so the company has significant earnings visibility and CLH recently beat earnings by 10 cents on stronger than expected revenues, up 20% over last year.

Alan McKim thinks fears of pollution from fracking are overblown, and mining natural gas can be clean and safe if the fracking water is disposed of carefully. Clean Harbors devises ways to recycle frack water to ensure the precious resource is not wasted and to prevent pollution. “I don’t think any other company has the services we do,” said McKim.

What Will Make Stocks Rise 1,000 points stock mentioned, Ciena (CIEN)

Gaddafi is messing up the stock market, but more because of rumor than reality. Stocks were volatile on stories the dictator might be removed, and on the subsequent confirmation that these rumors were false. The situation is like that of Saddam Hussein in the ’90s, when rumors of the tyrant’s death or departure were greatly exaggerated and took stocks up and down right along with them. In spite of the market’s own problems, such as Ciena’s (CIEN) disappointing outlook which sent down the tech sector, a sudden departure of Gaddafi would send stocks up 1,000 points, but only given the following conditions: 1) stocks first go down and stay down, 2) there is at least on successful NATO action, 3) we make peace with the kings of Bahrain and Saudi Arabia.

“Until then,” Cramer said, “while it is not worth chasing the market, it is not worth being too negative.”

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Jim Cramer was up 31% in 2009. Click here now to sign up for Jim’sAction Alerts PLUS and trade alongside him. Special discount for Seeking Alpha users.

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Investing Strategies For Canadian Banks � The Passive Income Earner

Investing Strategies For Canadian Banks � The Passive Income Earner

Investing Strategies With Canadian Banks

The door to the walk-in vault in the Winona Sa...

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I reviewed the top 6 banks since the beginning of January 2011 highlighting their value from a dividend investment perspective. Most Canadians have faith in the Canadian banks and I hope by now that non-Canadians have gain some belief in their stability. Before you go out and load up on all the banks, I thought I’d share some possible strategies depending on what you are looking for and your investing style. Even dividend investors have a style :)

Top 6 Banks

Below are the top 6 banks I reviewed sorted in market capitalization.
They can be categorized in 3 groups if you wish to look at it differently:
  • Very large international banks: RY, TD, BNS
  • Medium scale banks: BMO, CM
  • Small local bank: NA
They all compete against each other in Canada and since they still heavily rely on their Canadian business, the size of the players doesn’t really matter to some extent. A fee from a customer is still a fee generating profits. Their international growth is what can allow them to grow and expend further.

The Favorite Strategy

This strategy tends to be in line with the herd mentality which isn’t a good thing usually as the stocks tend to have gained by the time the herd comes. When it comes to banks, it may not be a bad thing as we come out of our late financial crisis since the recovery is much slower and the Canadian banks are positioned to profit from it. The current favorites by analysts are:
You get 2 strong banks in Canada with exposure to the U.S. with TD and exposure to South America with BNS.

The Contrarian Strategy

These banks are out of favor at the moment. Mostly because the analysts don’t see a quick buck to be made but this isn’t a sprint, it’s a marathon. The contrarian strategy is the one I tend to look for as it can have the bigger payout over time. Depending on the dividend yield and the ability for the bank to sustain it, being patient with these banks will usually pay in the long run. The banks for the contrarians are:
The payout ratio of these banks is higher than the favorite banks but it should get in line as they grow their earnings. The big question is if they will keep up with the expected dividend increase by the banks. There is expectation that BNS will increase at the next quarter. Considering they increased bank fees by 20%, I wouldn’t be surprised to see a 5%-10% dividend increase by BNS.

The Wild Card Strategy

With erratic numbers and a lack of consistency, this bank deserves the wild card strategy. It has done well recently compared with the other banks but my review from a number perspective was inconclusive. It’s still a bank and it will probably move along with the other banks but I can’t say if it will do better or not. It currently is last on my list unless I can be convinced otherwise. This bank is:

The Forgotten Gem

I admit, this is not a strategy but I needed to have a section for this bank. It has very strong numbers.
  • A P/E of 11.50 below all the other banks
  • A dividend yield of 3.52%
  • A payout ratio of 40% below all the other banks by nearly 10%
  • 1st bank to increase dividends
It’s mostly operating in Quebec and expending in Ontario. It has much growth potential. The bank is:

Summary

Those are strategies that I thought could work well depending on what you are looking for with your portfolio. I am particularly found of the contrarian strategy. Here is a little graph on how they compared in the last 6 months. As you can see, the forgotten gem takes the lead.
Investing in banks
Readers: What strategy do you prefer? Does it matter when it comes to banks?
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