Canadian Bank Analysis

Canadian Banking Stock Analysis

As my 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.      BNS

      2.      TD

      3.      BMO

      4.      RY

      5.      CM

      6.      LB

      7.      CWB

      8.      NA

.        

      1.      Price to Earnings Ratio.

Price to Earnings Ratio
BNS	BMO	TD	CWB	LB	CM	RY	NA
11.52	12	13.21	10.18	10.2	10.72	12.05	10.86

Price per 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
BNS	BMO	TD	CWB	LB	CM	RY	NA
10.8	10.5	11.2	9.8	8.4	9.8	11.2	9.9

Looking at the Forward P/E ratios again LB is very favorable followed by CM and NA.

      2.      Dividend Yield and Growth

Dividend Yeild
BNS	BMO	TD	CWB	LB	CM	RY	NA
4.01%	4.26%	3.55%	3.00%	4.52%	4.34%	3.81%	4.06%

 Next I 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
BNS	BMO	TD	CWB	LB	CM	RY	NA
6.12%	2.00%	10.16%	14.78%	8.43%	4.00%	9.00%	11.00%

 Dividend 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

Payout Ratio
BNS	BMO	TD	CWB	LB	CM	RY	NA
48.06%	51.17%	49.28%	32.59%	49.77%	55.47%	51.33%	43.15%

I also 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 dividend.

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.