Tuesday, February 21, 2017

Socialism

Ecuador is just the latest country to prove that socialism does not work. Building schools and clinics is good. That is because a health educated population is good for a country and all the people in a country. Building infrastructure is also good for a country.

I think that the problem with socialistic leaders is that it is more amount power and authority than in really helping the poor. These sorts of leaders tend to restrict free speech and any political opposition. They often give out money to the poor, but this seems mostly to make the poor dependent on them not to give them freedom and a better life.

If they really wanted to help the poor it would be better if they get out of their way. In most of South America it is very difficult to do business. It is almost impossible to set up a business, especially if you are poor. Ecuador ranks 114 in the ease of doing business according to the World Bank.

Lots of poor in South America live in shanty towns. I do not see why the government cannot give the land that people are living on to those people so that they would own something of value. The reason the US took off initially was that millions of people got plots of land for farming. In South America most of the land was owned by few people this is probably why they did not have the economic boost that the America's got.

I also do not see why Detroit or Chicago instead of reclaiming and tearing down abandon properties do let people homestead these places.

And, by the way, UK had the rule of law before democracy. It would be helpful if poor countries had this and it applied to the rulers as well as the ruled.

And another thing I do not understand. Why it Castro praised but Pinochet condemned. They were both murderous. At least Pinochet left the Chilean economy is good shape. If it was you or your family getting tortured and killed would you care if the person directing it professed left or right wing political aims? Would you get any comfort from the fact that they profess left wing drivel rather than right wing drivel?

The last thing I would like to point out is that I feel that it is dangerous that some people, especially the young say that communism has not really been tried as Marx meant it to be. This just opens up the possibility others trying communism and creating more human suffering.

If you want to read some interesting ideas on economics you should try Hernando De Soto . I especially liked his The Mystery of Capital. He may not be right, but he certainly is interesting. Another of my favorite author is Paul Collier. You can hear him on Ted.com . You can see what books he has written at Amazon.

On my other blog I wrote today Manulife Financial Corp. (TSX-MFC, NYSE-MFC)... learn more. Tomorrow, I will write about Emera Inc. (TSX-EMA, OTC-EMRAF)... learn more on Wednesday, February 22, 2017 around 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter.

Thursday, February 16, 2017

Take Your Time

I just bought stock for the money I had put into my TFSA account this year. It took me a while to decide what I wanted to do with this money. I finally decided to buy some more Evertz Technologies (TSX-ET, OTC-EVTZF). I could not at first decide what stock to buy so I just paused for a while.

Evertz Technologies (TSX-ET, OTC-EVTZF) is a small cap stock that I first bought in 2011. I have done well with a 12.20% total return per year. Most of the return is in dividends with the capital gains at 4.46% per year and the dividends at 7.74% per year. This is considered to be a Tech stock.

Rather than make a mistake in what you invest in, if you are unsure, perhaps it is best to take some time to review your options.

I plainly remember one time I did this before. It was when my portfolio was increasing fast. It took me 11 years to get $100,000 and then just 14 more to have enough to stop working. After I got to $100,000, my portfolio started to increase quite fast. I thought about getting a financial advisor and talked to a few. I also talked to people at the Money Show. In the end I decided to continue investing myself but I am glad I took time to consider where I wanted to go and what I wanted to invest in.

Pausing for while might have slowed down my returns but overall I have done well. So I think it was fine for me to take a pause every once in a while because I have done well overall.

This sort of thinking came up in a book I recently read called Thinking, Fast and Slow by Daniel Kahneman. There are reviews of this book Amazon. You might also want to look at reviews at Good Reads. They often have very good reviews.

On my other blog I wrote yesterday about ARC Resources Ltd. (TSX-ARX, OTC-AETUF)... learn more. Tomorrow, I will write about Home Capital Group (TSX-HCG, OTC- HMCBF)... learn more on Friday, February 17, 2017 around 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter.

Thursday, February 9, 2017

Something to Buy February 2017

There is always something to buy in the stock market. On Tuesday, I put out a list of the stocks that I covered and showed what stock might be a good deal based on dividend yield. Now I am trying to categorize what sorts of stocks may be a good deal based on dividend yield.

The advantages to using dividend yield to judge how cheap or expensive a stock is, is that you are not using estimates or old data (like last reported quarter's data). You are using today's stock price and today's dividend yield.

For other testing, like using P/E Ratios and Price/Graham Price Ratios, you use EPS estimates or from the last reported financial quarter. When using P/S Ratios, P/CF Ratios or P/BV Ratios you are using data from the last reported financial quarter.

This system does not work well for old Income Trust companies. These companies had quite high Dividend Yields which will probably never be seen again. So I started a column called VT (for Valid Test) and this applies to checking stock price using dividend yield. If not a valid test I use N to show this. For these stocks, you might be better comparing the current dividend yield to the 5 year median dividend yield.

However, no system is perfect. But if you are interested in buying a stock a list of stocks cheap or reasonable using dividend yield data might be a good place to start.

Categorizing stocks is not as simple as it might seem. Every site you go to has categorized stocks a bit differently. I try to keep this as simple as possible. See Something to Buy February 2017 Spreadsheet to see what stocks are showing whether a stock is relatively cheap based on historical high dividend yields (P/Hi), historical average dividend yields (P/Ave), historical median dividend yields (P/Med) or on 5 year median dividend yields (P/5Yr). As in other spreadsheets, you can highlight a line or a number of lines for better viewing.

In the following notes I am only going to list stocks showing as cheap using the historical high dividend yields (P/Hi) and historical median dividend yields (P/Med).

I follow 21 stocks in the Consumer Discretionary category. None of these stocks are showing as cheap by the historically high dividend yield. Nine (or 43%) are showing cheap by historical median dividend yield. They are Canadian Tire Corporation (TSX-CTC.A, OTC-CDNAF), DHX Media Ltd. (TSX-DHX.A, OTC-DHXMF), Dorel Industries (TSX-DII.B), Goodfellow Inc. (TSX-GDL, OTC-GFELF), High Liner Foods (TSX-HLF, OTC-HLNFF), Leon's Furniture (TSX-LNF); Magna International Inc. (TSX-MG), Newfoundland Capital Corp (TSX-NCC.A) and Reitmans (Canada) Ltd. (TSX-RET.A). There is no change from last month.

I follow 12 Consumer Staples stocks. There is one company showing as cheap by the historically high dividend yield and that is Empire Company Ltd. (TSX-EMP.A, OTC-EMLAF). Four stocks (or 33%) are showing cheap by historical median dividend yield. These are Empire Company Ltd. (TSX-EMP.A, OTC-EMLAF), Jean Coutu Group Inc. (TSX-PJC.A, OTC-JCOUF), Loblaw Companies (TSX-L, OTC-LBLCF) and Metro Inc. (TSX-MRU, OTC-MTRAF). Metro is new to this list and it just raised their dividend by some 16%.

I only follow two Health Care stocks and both are US stocks. None of these stocks are showing as cheap by the historically high dividend yield. They are both cheap by the historical median dividend yield. The stocks are Johnson and Johnson (NYSE-JNJ) and Medtronic Inc. (NYSE-MDT). This is the same as for last month.

I follow 12 Real Estate stocks. None of these stocks are showing as cheap by the historically high dividend yield. Three stocks (or 25%) are showing cheap by historical median dividend yield. They are Artis REIT (TSX-AX.UN); Granite Real Estate (TSX-GRT.UN) and Melcor Developments Inc. (TSX-MRD. This is the same as last month.

I follow 8 Bank stocks. There is one company showing as cheap by the historically high dividend yield and that is Home Capital Group (TSX-HCG, OTC-HMCBF). Three stocks (or 42%) are showing cheap by the historical median dividend yield. These stocks are CIBC (TSX-CM, NYSE-CM), Home Capital Group (TSX-HCG, OTC-HMCBF) and National Bank of Canada (TSX-NA). Barclays PLC (NYSE-BCS) and Bank of Nova Scotia (TSX-BNS) have been taken off this list. Note that CIBC is new to this list and I just started to cover this bank.

I follow 13 Financial Service stocks. None are showing as cheap by the historically high dividend yield. Eight (or 62%) stocks are showing cheap by the historical median dividend yield. These stocks are Accord Financial Corp (TSX-ACD, OTC-ACCFF), AGF Management Ltd (TSX-AGF.B), Alaris Royalty Corp (TSX-AD, OTC-ALARF), CI Financial (TSX-CIX), Equitable Group Inc. (TSX-EQB, OTC-EQGPF), Gluskin Sheff + Associates Inc. (TSX-GS), IGM Financial (TSX-IGM) and Power Corp (TSX-POW). There is no change from last month. Note that DirectCash Payments Inc. (TSX-DCI, OTC-DCTFF) has been bought out and delisted from the TSX.

I follow 5 Insurance stocks. None are showing as cheap by the historically high dividend yield. Four stocks (or 80%) are showing cheap by historical median dividend yield. These stocks are Great-West Lifeco Inc. (TSX-GWO); Manulife Financial Corp (TSX-MFC); Power Financial Corp (TSX-PWF) and Sun Life Financial (TSX-SLF). There is no change from last month.

I follow 34 Industrial stocks. Because I have so many and Industrial is not very descriptive, I have divided my Industrial stocks into 4 separate categories under Industrial. They are Construction, Industrial, Manufacturing and (Business) Services.

I have 6 Construction stocks. None are cheap by the historically high dividend yield. Two stocks or 33% are showing as cheap by historical median dividend yield. They are and SNC-Lavalin (TSX-SNC, OTC-SNCAF) and Stantec Inc. (TSX-STN, NYSE-STN). There is no change from last month.

I have 3 stocks I have left with the sub-index of Industrial. None are cheap by the historically high dividend yield. Two stocks or 67% are showing as cheap by historical median dividend yield. They are Finning International Inc. (TSX-FTT, OTC-FINGF), and Russel Metals (TSX-RUS, OTC-RUSMF). There is no change.

I have 9 Manufacturing stocks. There is one company showing as cheap by the historically high dividend yield. Four stocks or 56% are showing as cheap by historical median dividend yield. They are Canam Group Inc. (TSX-CAM, OTC-CNMGA), Exco Technologies Ltd. (TSX-XTC, OTC-EXCOF), Hammond Power Solutions Inc. (TSX-HPS.A, OTC-HMDPF), and PFB Corp (TSX-PFB, OTC-PFBOF). Intertape Polymer Group Inc. (TSX-ITP, OTC-ITPOF) has been removed from this list.

I have 16 Services stocks. None are showing as cheap by the historically high dividend yield. Three stocks or 19% are showing as cheap by historical median dividend yield. These stocks are Canadian National Railway (TSX-CNR, NYSE-CNI), Pason Systems Inc. (TSX-PSI, OTC-PSYTF) and Transcontinental Inc. (TSX-TCL.A, OTC-TCLAF). There is no change from last month.

I follow 7 Material stocks. None are showing as cheap by the historically high dividend yield. No stock is showing as cheap by historical median dividend yield. Methanex Corp (TSX-MX, NASDAQ-MEOH) has been removed from this list.

I follow 9 Energy stocks. One Stock or (11%) is showing as cheap by the historical high dividend yield. It is Ensign Energy Services (TSX-ESI, OTC-ESVIF) There are three stocks (or 33%) showing cheap by historical median dividend yield. They are Canadian Natural Resources (TSX-CNQ, NYSE-CNQ), Ensign Energy Services (TSX-ESI, OTC-ESVIF); and Suncor Energy (TSX-SU, NYSE-SU). There is no change from last month.

I follow 8 Tech stocks. None are showing as cheap by historical high dividend yield. Four stocks (or 50%) are showing cheap by historical median dividend yield. They are Absolute Software Corporation (TSX-ABT, OTC-ALSWF) Computer Modelling Group Ltd. (TSX-CMG, OTC-CMDXF), Evertz Technologies (TSX-ET, OTC-EVTZF) and MacDonald Dettwiler & Assoc. (TSX-MDA, OTC-MDDWF). Calian Technologies Ltd (TSX-CTY, OTC-CLNFF) has been removed from this list and Absolute Software Corporation (TSX-ABT, OTC-ALSWF) has been added back to it.

I follow 8 of the Infrastructure type utility companies. None are showing as cheap by historical high dividend yield. Two stocks (or 25%) are showing cheap by historical median dividend yield. They are AltaGas Ltd (TSX-ALA, OTC-ATGFF) and Enbridge Inc. (TSX-ENB, NYSE-ENB). This is the same as last month.

I follow 12 of the Power type utility companies. None are showing as cheap by the historically high dividend yield. Three stock (or 25%) is showing cheap by historical median dividend yield. Those stocks are ATCO Ltd (TSX-ACO.X, OTC-ACLLF), Canadian Utilities Ltd (TSX-CU, OTC-CDUAF) and Fortis Inc. (TSX-FTS, OTC-FRTSF). Canadian Utilities Ltd (TSX-CU, OTC-CDUAF) has been added to this list.

I follow 5 of the Telecom Service type utility companies. No stock is showing cheap by the historical high dividend yield. Three stocks (or 60%) are showing cheap by historical median dividend yield. These stocks are Shaw Communications Inc. (TSX-SJR.B, NYSE-SJR), Telus Corp (TSX-T, NYSE-TU) and WiLan Inc. (TSX-WIN, NASDAQ-WILN). WiLan Inc. (TSX-WIN, NASDAQ-WILN) has been added back to this list.

On my other blog I wrote yesterday about Exco Technologies Ltd. (TSX-XTC, OTC-EXCOF)... learn more. Tomorrow, I will write about Canadian National Railway (TSX-CNR, NYSE-CNI)... learn more on Friday, February 10, 2017 around 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk . The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter.

Tuesday, February 7, 2017

Dividend Stocks February 2017

First I want to point out that not all of the stocks I follow are great investments. I follow a diverse selection of stocks. There are some that I would never invest in personally. I follow a number of resource stocks even though I personally have little invested in this area. I follow what I find interesting and with resource stocks, I think it is important for Canadians to know what is happening in the resource area. On the other hand I do follow of good number of great dividend growth stocks.

The theory is that you should use the dividend yield to see if a dividend stock is selling at a stock price that is relatively cheap. A stock price is considered cheap if it is selling at a dividend yield higher than the historical high yield or higher than the historical average yield or historical median yield. See my spreadsheet at dividend growth stocks that I just updated for February 2017.
  • I have 3 stocks with a dividend yield higher than the historical high dividend yield,
  • I have 33 stocks with a dividend yield higher than the historical average dividend yield
  • I have 59 stocks with a dividend yield higher than the historical median dividend yield and
  • 61 stocks with a dividend yield higher than the 5 year average dividend yield.
When I did my list last list in January,
  • I have 2 stocks with a dividend yield higher than the historical high dividend yield,
  • I have 32 stocks with a dividend yield higher than the historical average dividend yield
  • I have 59 stocks with a dividend yield higher than the historical median dividend yield and
  • 59 stocks with a dividend yield higher than the 5 year average dividend yield.
When I did my list in January 2014,
  • I had 9 stocks with a dividend yield higher than the historical high dividend yield,
  • I had 45 stocks with a dividend yield higher than the historical average dividend yield and
  • 39 stocks with a dividend yield higher than the 5 year average dividend yield.
If you had one share of each stock, total dividends last month would be $ $153.06. This month dividends would be $156.09. Of the stock that I follow 10stocks has raised their dividends since last month. Dividends raises are denoted in green. Those stocks are shown below.

BCE (TSX-BCE, NYSE-BCE)
Canadian National Railway (TSX-CNR, NYSE-CNI)
Canadian Utilities Ltd (TSX-CU, OTC-CDUAF)
Enbridge Inc. (TSX-ENB, NYSE-ENB)
Metro Inc. (TSX-MRU, OTC-MTRAF)

Richelieu Hardware Ltd. (TSX-RCH, OTC-RHUHF)
Algonquin Power & Utilities Corp (TSX-AQN, OTC-AQUNF)
ATCO Ltd (TSX-ACO.X, OTC-ACLLF)
Enbridge Income Fund Holdings Inc. (TSX-ENF, OTC-EBGUF)
Exco Technologies Ltd. (TSX-XTC, OTC-EXCOF)

Of the stocks that I follow 0 companies has decreased their dividends.

The stock Ballard Power Systems Inc. (TSX-BLDP, NASDAQ-BLDP) has changed its TSX symbol from BLD to BLDP, the OTC symbol remains BLDP.

DirectCash Payments Inc. (TSX-DCI, OTC-DCTFF) shares are delisted from the TSX as they were bought out by Cardtronics Holdings Ltd. at $19.00 a Share. January 9, 2017. I am dropping this stock from my list.

Most of my stocks started out as Dividend Payers. Currently 15 stocks are not paying any dividends and this would be some 10.14% of the stocks that I follow. Three of these stocks never had dividends, so 8.11% of the stocks I follow have suspended their dividends. The three stocks that never paid dividends are Ballard Power Systems Inc. (TSX-BLD, NASDAQ-BLDP0, Blackberry Ltd. (TSX-BB, NASDAQ-BBRY) and Kombat Copper Inc. (TSX-KBT, OTC-PNTZF).

I am showing whether a stock is relatively cheap based on historical high dividend yields (P/Hi), historical average dividend yields (P/Ave), historical median dividend yields (P/Med) or on 5 year median dividend yields (P/5Yr). See these fields on the right side of the file. You can highlight a particular stock using your cursor to highlight the appropriate line.

There are always some stocks to buy because they are priced reasonably. There are always stocks to currently avoid because they are overpriced. Looking at dividend growth stocks that are selling at stock prices that give them a dividend yield above the historical median dividend yield are probably the best bet.

The stocks that are selling at prices that give them a dividend yield above the historical high yield could be good stocks to buy. However, these stocks may be selling so cheap because of current troubles, especially financial troubles and should be treated with caution. Do not forget that I have all the stocks I follow on this spreadsheet and some are much better investments than others.

You should always investigate a stock before you buy. Sometimes different stocks in certain sectors are just out of favour or the stock market is just in one of its declines. However, a stock may be relatively cheap because it has problems. That is why you should always investigate a stock before buying.

Looking at stock this way is equivalent to a stock filter. A main problem I know of is for the old income trusts. These companies have generally lowered their dividend yields forever and they will probably never get back to the old dividend yield highs they made as an income trust company. For these stocks, you might be better comparing the current dividend yield to the 5 year median dividend yield. I also started a column called VT (for Valid Test) and this applies to checking stock price using dividend yield. If not a valid test I use N to show this.

Also, on some stocks I have a lot more information years in my spreadsheets than for other stocks. So, finding a stock on the list as "cheap" is only the first step in finding a stock to buy. This is the same with any other sort of stock filters that you can use.

The last thing to remember is that I have entering figures into a spreadsheet. I could put them in incorrectly, I can transpose figures and I can misread figures. This is another great reason why you should check a stock out before investing. As this is just a filter, it works better on some stocks than on others.

See my entry on my methodology in establishing the historical dividend yield highs and lows for the stocks that I cover. I have an entry on my introduction to Dividend Growth. You might want to look at my original entry on Dividend Growth Stocks. I have also written about why I like Dividend Growth companies.

The last stock I wrote about was about was AGF Management Ltd. (TSX-AGF.B, OTC-AGFMF)... learn more. The next stock I will write about will be Exco Technologies Ltd. (TSX-XTC, OTC-EXCOF)... learn more on Wednesday, February 7, 2017 around 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.

Thursday, February 2, 2017

Go Forward Basis

So you have a stock that is not doing well. What does the future hold for the stock? If it is unclear or not good what you need to think about is "What is good for my portfolio on a go forward basis?" There is no point in crying about spilt milk. If you have a losing stock or one that is going nowhere it is time to think about moving on. So ask yourself on a go forward basis, what is the best thing to do?

By focusing on the future you might be able to deal better with a failed investment. We all have them and we should not beat ourselves up over them. We need to move on to the future and do what is right for the future.

I often give a stock five years to prove its worth. I have bought stocks that as soon as I have bought them they go down in value. We have all been there. Yes you should review them if that happens, but if you have not changed your mind about the company, give it time. It is not a good idea to buy and sell stocks quickly if the performance you expected is not there. That is the way to lose money. You need instead to sit back and give you decision time to play out.

On my other blog I wrote yesterday about Valener Inc. (TSX-VNR, OTC-VNRCF)... learn more. Tomorrow, I will write about Shaw Communications Inc. (TSX-SJR.B, NYSE-SJR)... learn more on Friday, February3, 2017 around 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter.

Tuesday, January 31, 2017

Banks and Ratios

The reason to look at company ratios is that the stock price for a company tells you very little. The price of a stock certainly does not tell you if the stock is cheap or expensive. For example a stock price of $10 on one stock could be an expensive price, but a stock price of $20 on another stock could be a cheap price. It is like all stocks have their own currency and you will need a common frame of reference in order to tell how cheap or expensive a stock is. My Spreadsheet is here.

In this entry I am only talking about the big 6 Canadian Banks of Bank of Montreal, Bank of Nova Scotia, CIBC, Royal Bank, National Bank, and TD Bank. I try to get the right information, but I cannot guarantee anything.

The method I like best to check for a good stock price is dividend yield and this against the historical median dividend yield. What you are looking for is a current dividend yield higher than the historical dividend yield. Of the big banks that I follow, the Canadian Imperial Bank of Commerce comes off well in this test.

For CIBC the current dividend yield is 4.38% and this historical one is 4.25% a value 3% lower. The only other bank to have a higher current yield than the historical one is National Bank with a current dividend yield of 3.96% and a historical dividend yield of 3.94%.

My next favourite test is using the Graham Price. Of the big banks I follow, the CIBC is relatively lower with the current Price/Graham Price Ratio some 5% below its historical median P/GP Ratio. None of the other banks have a lower P/GP Ratios that the 10 year median. The Royal Bank is close being only 0.4% above.

One of the most common ratios to look at is the P/E Ratio. When dealing with P/E Ratios, the lower the P/E ratio the better the relatively price is. Below is the 5 year low, median and high median P/E Ratios for each bank I follow. Basically what this chart tells you is that investors are willing to pay relatively more money for TD Bank shares per dollar of earnings than for other banks.

Bank Symbol Low P/E Median P/E High P/E
Bank of Montreal BMO 10.05 11.33 12.61
Bank of Nova Scotia BNS 10.29 11.32 12.50
CIBC CM 9.00 9.89 10.78
Royal Bank RY 9.98 11.33 12.46
National Bank NA 9.04 10.62 12.21
TD Bank TD 11.40 12.63 13.69

So what is the relatively cheapest bank today? Currently CIBC has the lower P/E. In the last column I am comparing the Historical Median P/E with the Current P/E. This shows that TD Bank has dropped the least from its median. It is off the median by less than 1%

Bank Symbol Price 2017 EPS Est. Curr P/E M/C Bank of Montreal BMO $100.66 $7.58 13.28 17.21% Bank of Nova Scotia BNS $78.61 $6.31 12.46 10.05% CIBC CM $113.16 $10.30 10.99 11.09% Royal Bank RY $94.47 $6.99 13.52 19.29% National Bank NA $56.54 $5.05 11.20 5.42% TD Bank TD $68.35 $5.40 12.66 0.22%
The next most common ratio is the Price/Book Value per Share Ratio. For Price/Book Value per Share Ratio, the lower the P/B Ratio is, the more book value you get for your money. Theoretically, the book value is the difference between assets and liabilities and therefore is the potential value a company is worth or the breakup value of the stock for the shareholders.

When valuing a stock, the lower the P/B Ratio is, the better the stock price is on a relative basis. The 10 year median P/B Ratios for our banks are below. From this it is obvious that historically, investors were willing to pay a relatively higher price for Royal Bank shares than other shares. It could also say that the Bank of Montreal offers the best deal when it comes to Book Value per Share.

Last year, except for BNS and CIBC, all the 10 year P/B Ratios for these banks were higher. On a relative basis, investors were still willing to pay a relatively higher price of the Royal Bank shares and Bank of Montreal was still the best deal with it come to Book Value per Share.

Bank Symbol Price 2017 EPS Est. Curr P/E M/C
Bank of Montreal BMO $100.66 $7.58 13.28 17.21%
Bank of Nova Scotia BNS $78.61 $6.31 12.46 10.05%
CIBC CM $113.16 $10.30 10.99 11.09%
Royal Bank RY $94.47 $6.99 13.52 19.29%
National Bank NA $56.54 $5.05 11.20 5.42%
TD Bank TD $68.35 $5.40 12.66 0.22%

Of the banks I follow, BMO has the lowest P/B Ratio and the BNS is the lowest relative to its 10 year P/B Ratio as its current P/B Ratio is some 7.5% lower than the 10 year P/B Ratio.

Bank Symbol Price BVPS Current P/B M/C
Bank of Montreal BMO $100.66 $60.49 1.66 8.76%
Bank of Nova Scotia BNS $78.61 $43.59 1.80 -7.53%
CIBC CM $113.16 $56.59 2.00 -1.50%
Royal Bank RY $94.47 $43.32 2.18 5.85%
National Bank NA $56.54 $28.52 1.98 13.93%
TD Bank TD $68.35 $36.69 1.86 15.57%

For dividend paying stocks, the Dividend Payout Ratios are important. For the DPRs, lower ratios are better ratios. For Banks the DPR for EPS is the most important one. When looking at these ratios, it would appear that TD Bank has the best one, which is the lowest one. The National Bank is above the 40 to 55% level you would expect from a bank. However, I think this is just temporary.

The problem with cash flow is that for banks they tend to be volatile and often negative. A lot of analysts ignore the Cash Flow of banks.

Bank Symbol DPR for EPS DPR for CFPS
Bank of Montreal BMO 48.55% -81.94%
Bank of Nova Scotia BNS 49.91% 84.87%
CIBC CM 44.39% 18.47%
Royal Bank RY 47.20% 17.69%
National Bank NA 65.35% 13.37%
TD Bank TD 46.25% 9.09%

When Shares are issued for Stock Options, you want a company that issues around the same relative number of shares for its industry. Of course, the lower the number of shares issued for stock options, the less money comes out of the earnings for shareholders. In the value column, I am putting in the value of the stock options at the end of the calendar year.

In 2016 CIBC has one of the lowest percentages of their shares issued for stock options purposes. However, it was the second lowest when it came to the cost of these stock options. For 2016 BNS has the highest percentage of their shares issued for stock purposes and also the highest cost. All the banks issued more shares and a higher percentage of their shares in 2016 compared to 2015.

Bank Symbol Shares % of Shares Value 2016
Bank of Montreal BMO 2.103 0.33% $179M
Bank of Nova Scotia BNS 4.228 0.35% $304M
CIBC CM 0.816 0.21% $89M
Royal Bank RY 4.981 0.34% $417M
National Bank NA 1.123 0.33% $54M
TD Bank TD 4.900 0.26% $298M

For the 10 year Price/Graham Price Ratios, the lower the ratio the lower the relative price of the underlying shares. Here again, this chart shows that investors are willing to pay a relatively higher price for Royal Bank stock than for other bank stocks. It also shows that generally the BMO has a relatively lower stock price.

Bank Symbol Low Median High
Bank of Montreal BMO 0.73 0.87 0.99
Bank of Nova Scotia BNS 0.86 0.93 1.13
CIBC CM 0.88 1.04 1.16
Royal Bank RY 0.95 1.14 1.32
National Bank NA 0.77 0.88 1.03
TD Bank TD 0.86 0.98 1.08

So on a relative basis what stock is cheaper? BMO, CIBC and National are tied with the lowest P/GP Ratio for the stocks that I follow. The CIBC has relatively the lowest P/GP Ratio compared to the 10 year median value being some 5% lower.

Bank Symbol Price Graham Price P/GP Ratio M/C
Bank of Montreal BMO $100.66 $101.57 0.99 13.91%
Bank of Nova Scotia BNS $78.61 $64.37 1.22 31.31%
CIBC CM $113.16 $114.52 0.99 -4.99%
Royal Bank RY $94.47 $82.55 1.14 0.39%
National Bank NA $56.54 $56.93 0.99 12.86%
TD Bank TD $68.35 $64.12 1.07 8.77%

For dividend yields, the higher the dividend yields the better the relative price of a stock is. Here is the 5 year median and historical average and historical median dividend yields based on my spreadsheets for our banks.

Bank Symbol 5 Year Hist. Ave Hist. Med
Bank of Montreal BMO 4.29% 5.30% 4.29%
Bank of Nova Scotia BNS 4.12% 5.15% 3.92%
CIBC CM 4.67% 4.64% 4.25%
Royal Bank RY 3.95% 4.38% 3.92%
National Bank NA 4.16% 6.04% 3.94%
TD Bank TD 3.75% 3.26% 3.34%

The best test of whether or not a stock is cheap or expensive is to compare the current dividend yield to the Historical Median Dividend yield. Except for CIBC and National bank, all the banks I follow have lower dividend yields than the historical median. What you want is for a good stock price is for the current years to be higher than the historical median.

The higher the dividends yield the better and in this category, the winner is the CIBC at 4.38%. Also CIBC is also the one which is the highest compared to the historical median. It is some 3% higher than the historical median dividend yield. All this data is going back to 1988.

Bank Symbol Price Dividend Yield M/C
Bank of Montreal BMO $100.66 $3.52 3.50% -18.49%
Bank of Nova Scotia BNS $78.61 $2.96 3.77% -3.94%
CIBC CM $113.16 $4.96 4.38% 3.13%
Royal Bank RY $94.47 $3.32 3.51% -10.35%
National Bank NA $56.54 $2.24 3.96% 0.55%
TD Bank TD $68.35 $2.20 3.22% -3.63%

Canadian Imperial Bank of Commerce (TSX-CM, NYSE-CM)... learn more. Tomorrow, I will write about Valener Inc. (TSX-VNR, OTC-VNRCF)... learn more on Wednesday, February 1, 2017 after 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Thursday, January 26, 2017

Rethinking Retirement

Since we are living longer and longer lives, maybe school, work, retirement is not the way to go. I think that school will be an off and on thing to begin with. There is probably no course you can take today that will be valid all your life.

My father had a job for life. I did not. I worked for 5 different companies but had more than 5 different jobs. I did not have to go back to school to progress to different jobs. I did take courses and went for training seminars. However, the new kids coming into work at what I was doing had two year college course just to start in a junior position.

It seems like people do not expect training or education to last for a long time in work. For example a friend of mine took a project management course to get a certificate. Now with this certificate you must renew it every five years. So, in five years' time you basically begin again. Things are changing rapidly.

Another problem is Pensions. Pension plans are having troubles especially for civil services who can retire at 55. There are many in retirement reaching 100. So if you start work at 20 and retire at 55 after working 35, you live to 100, that is have 45 years of retirement. Pension plans were never designed to do this and cannot.

How many years of retirement could you save for? The current life expectancy in Canada is 81.24 years. But that means that 50% of the people are dead at that age and 50% are not. As far as I know the oldest person lived to 121. Most will not do that, but living into your 90's is a very real possibility. So if you start work at 20 and live until 90 do you really think that you could fund 25 years of retirement after working 45 years? This will give you a retirement age of 65. Retiring earlier just makes it worse.

Death at 100 95 90 85 80
Start w 20 20 20 20 20
Retire at 55 55 55 55 55
Years R 45 40 35 30 25
Years W 35 35 35 35 35
Death at 100 95 90 85 80
Start w 20 20 20 20 20
Retire at 60 60 60 60 60
Years R 40 35 30 25 20
Years W 40 40 40 40 40
Death at 100 95 90 85 80
Start w 20 20 20 20 20
Retire at 65 65 65 65 65
Years R 35 30 25 20 15
Years W 45 45 45 45 45

Looking at retirement if you become a couch potato after retirement the mortality statistics are awful. A lot of people who following this route are dead in 5 years from strokes, heart attacks or cancer. There also are lots of retirees that are working. They do this because they are bored or need some extra money or for both reasons.

People who retire successfully talk about having a passion for something. They fulfill their passion after retirement so that they can live a long and fulfilled retirement. I have seen some people successfully start a new career after retirement. It does not matter what you have a passion in. What is important is that you are interested.

Personally, I blog, analyze stocks, exercise, read and socialize. You have to have money. I get CPP plus my dividend income from the stocks that I hold. I also do a bit of stock trading to keep investing interesting.

I think we should rethink retirement or maybe we should just cancel it.

On my other blog I wrote yesterday about National Bank of Canada (TSX-NA, OTC-NTIOF)... learn more. Tomorrow, I will write about Transcontinental Inc. (TSX-TCL, OTC-TCLAF)... learn more on Wednesday, January 25, 2017 around 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter.