Thursday, January 25, 2018

Banks and Other Things

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 CIBC 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.

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 2017 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 2017 BNS has the highest percentage of their shares issued for stock purposes and Royal Bank the highest cost.

Bank Symbol Shares % of Shares Value 2018
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

Since I was looking for performance on a long term basis this year, I want to include the dividend growth and total return for the 6 banks that I cover.

Below is a chart showing the long term growth of dividends for these banks. Certainly in most cases the 15 to 30 years growth is better than the 5 and 10 years growth. The TD Bank has the best ones over each period, but Royal Bank is not far behind. In all durations but one, TD Bank is the highest.

Bank Symbol 5 Yr 10 Yr 15 Yr 20 Yr 25 Yr 30 Yr
Bank of Montreal BMO 4.68% 2.65% 7.44% 7.69% 7.87% 6.74%
Bank of Nova Scotia BNS 6.85% 5.77% 10.05% 11.12% 10.35% 9.89%
CIBC CM 6.89% 5.03% 8.01% 8.20% 8.51% 7.56%
Royal Bank RY 8.15% 6.17% 10.10% 11.14% 10.65% 9.20%
National Bank NA 8.25% 7.42% 11.26% 10.98% 7.11% 7.26%
TD Bank TD 10.21% 8.34% 10.03% 11.22% 10.58% 10.83%

The other thing I looked at was long term total return. This is calculated from December to December. It will include both capital gains and dividends. It is a compound growth rate per year. Here TD Bank is the highest in 3 durations, Royal Bank in 2 durations and National Bank in 1 duration.

Bank Symbol 5 Yr 10 Yr 15 Yr 20 Yr 25 Yr 30 Yr
Bank of Montreal BMO 14.91% 10.13% 10.18% 9.65% 14.48% 15.30%
Bank of Nova Scotia BNS 11.25% 8.64% 12.08% 12.04% 15.91% 16.60%
CIBC CM 13.49% 10.03% 12.15% 8.82% 14.64% 12.50%
Royal Bank RY 15.37% 10.86% 12.71% 12.33% 16.50% 17.03%
National Bank NA 14.35% 13.28% 13.62% 12.24% 16.17% 12.28%
TD Bank TD 15.73% 11.05% 14.00% 12.05% 20.62% 14.43%

On my other blog I wrote yesterday about Sylogist Ltd (TSX-SYZ, OTC-SYZLF)... learn more. Next, I will write about Enghouse Systems Ltd (TSX-ENGH, OTC-EGHSF)... learn more on January 26, 2018 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.

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