first stock evaluation I plan to share I have chosen to take a look at the
Canadian Banks. I will look at the following in detail:
1. Price to Earnings Ratio.
Price to Earnings Ratio
earnings across all the financials is very favorable compared to the TSX or
S&P500. The most favorable P/E is CWB however, due to its western Canadian
exposure I am going to neglect this as an investment option at this time but
will continue to monitor it on my watchlist. With that being said the next most
favorable P/E ratio is LB at 10.2. It should be noted though that all P/E
ratios are favorable compared to the overall market.
Forward P/E Ratio
at the Forward P/E ratios again LB is very favorable followed by CM and NA.
2. Dividend Yield and Growth
looked at dividend yield and again Laurentian Bank has the highest yield at
4.52%. However, I also noted that of the 5 Large Canadian banks CM had the
highest yield at 4.34%.
Dividend Growth Rate
growth rate is a very important factor as a dividend investor. Overtime you
want your dividend to grow and thus return more. CWB again has a very high
growth rate and again I will continue to monitor this stock, next in line will
be NA at 11% and TD at 10.16%. It is also noted here that BMO and CM have very
low dividend growth rates and on this alone I would not consider a position in
either of those banks.
3. Payout Ratio
looked into Payout ratio and all the banks have a payout ratio less than 60%
therefore all the dividends should be safe with room for them all to grow the
After my analysis I believe the
Canadian banks offer a great investment opportunity with safe and reliable
dividends. I believe Laurentian Bank offers a great opportunity for a long-term
investment and I plan to start a position in LB within the next year. I also
like CM and it performed well I all categories as well however, LB has a higher
yield and is cheaper on a P/E ratio. The other surprise was the performance of
CWB. However, due to the western Canadian exposure and current market
conditions in the area I would wait before establishing a position in CWB. I
plan to monitor the whole bank sector and perhaps establish a position during
the next slight correction.