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 Nation Bank has the best one, which is the lowest one. Last year the National Bank also had the lowest payout of EPS at 40.40%. The DPR payout expect is in the 40 to 55% level for banks. On this basis all the banks BNS and CIBC have DPRs that are too high. Last year all banks were fine.
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 2021 | Symbol | DPR for EPS | DPR for CFPS |
|---|---|---|---|
| Bank of Montreal | BMO | 55.76% | 39.63% |
| Bank of Nova Scotia | BNS | 67.92% | Neg CF |
| CIBC | CM | 70.80% | 63.36% |
| Royal Bank | RY | 54.48% | 45.15% |
| National Bank | NA | 49.30% | 38.55% |
| TD Bank | TD | 48.37% | 49.00% |
I have started to look at Dividend Payouts compared to Free Cash Flow. The problem I have with checking dividends against Free Cash Flow is that different sites sometimes have different values for FCF. This is a continuing problem.
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 book value of the stock options at the end of the calendar year.
For the 2020 financial year, all the banks issued stock options at a lower percentage of outstanding share. The value of the stock options in 2020 was also lower according to their book value. Again this year, National Bank gave out the highest percentage of their outstanding shares and also the highest in book value.
| Bank 2021 | Symbol | Shares | ‘% of Shares | Value $M |
|---|---|---|---|---|
| Bank of Montreal | BMO | 0.564 | 0.09% | $40 |
| Bank of Nova Scotia | BNS | 0.942 | 0.08% | $59 |
| CIBC | CM | 0.824 | 0.18% | $87 |
| Royal Bank | RY | 1.043 | 0.07% | $80 |
| National Bank | NA | 2.318 | 0.69% | $111 |
| TD Bank | TD | 1.500 | 0.08% | $79 |
In 2019 financial year CIBC has the lowest percentage of their shares issued for stock option purposes at 11%. They also had the lowest book value cost at $52M. National bank gave the highest percentage of outstanding shares and BNS options was at the highest amount.
| Bank 2020 | Symbol | Shares | ‘% of Shares | Value $M |
|---|---|---|---|---|
| Bank of Montreal | BMO | 0.962 | 0.15% | $62 |
| Bank of Nova Scotia | BNS | 4.111 | 0.34% | $253 |
| CIBC | CM | 0.512 | 0.11% | $52 |
| Royal Bank | RY | 1.900 | 0.13% | $136 |
| National Bank | NA | 2.951 | 0.88% | $122 |
| TD Bank | TD | 2.300 | 0.13% | $124 |
Since I was looking for performance on a long term basis, 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 most periods. The National Bank has the second highest dividend increase over most periods. It was the same last year.
| Symbol | 5 Yr. | 10 Yr. | 15 Yr. | 20 Yr. | 25 Yr. | 30 Yr. |
|---|---|---|---|---|---|---|
| BMO | 5.51% | 4.16% | 5.63% | 7.45% | 7.79% | 7.15% |
| BNS | 5.77% | 6.27% | 6.92% | 10.37% | 10.27% | 9.30% |
| CM | 6.39% | 5.28% | 5.36% | 7.82% | 8.60% | 7.53% |
| RY | 6.19% | 7.58% | 8.01% | 9.61% | 10.77% | 9.42% |
| NA | 7.22% | 7.68% | 9.37% | 10.63% | 10.80% | 6.91% |
| TD | 9.23% | 9.81% | 9.57% | 10.03% | 11.18% | 9.77% |
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 I am looking for total return of 8% per year or more. All the banks achieved that with the 5 years ending December 2020.
| Symbol | 5 Yr. | 10 Yr. | 15 Yr. | 20 Yr. | 25 Yr. | 30 Yr. |
|---|---|---|---|---|---|---|
| BMO | 8.79% | 9.93% | 7.70% | 8.78% | 13.08% | 15.69% |
| BNS | 9.55% | 6.32% | 6.96% | 10.88% | 15.59% | 18.49% |
| CM | 8.99% | 8.26% | 6.80% | 9.03% | 12.70% | 12.82% |
| RY | 11.46% | 11.41% | 9.68% | 11.36% | 16.43% | 14.90% |
| NA | 14.68% | 10.83% | 8.97% | 12.62% | 15.49% | 14.91% |
| TD | 10.08% | 10.92% | 9.50% | 9.52% | 15.44% | 14.46% |
Last year, when I was reporting in 2020, mostly the banks achieve an 8% return per year over the past 5 years except for BNS and CIBC when I was reporting on the 5 years ending December 2019.
| Symbol | 5 Yr. | 10 Yr. | 15 Yr. | 20 Yr. | 25 Yr. | 30 Yr. |
|---|---|---|---|---|---|---|
| BMO | 8.12% | 10.49% | 7.68% | 12.26% | 14.03% | 14.47% |
| BNS | 6.48% | 8.48% | 8.16% | 13.26% | 15.88% | 15.88% |
| CM | 6.42% | 9.80% | 12.42% | 11.01% | 13.57% | 12.44% |
| RY | 8.96% | 9.98% | 12.49% | 14.54% | 16.57% | 13.78% |
| NA | 10.62% | 12.72% | 10.80% | 15.29% | 16.25% | 12.13% |
| TD | 9.43% | 12.20% | 11.08% | 10.07% | 15.83% | 12.89% |
The next thing to cover is how well the banks cover their deposits with assets. In this case, the lower the ratio the better. TD has the lowest and best ratio and last year Royal Bank had the lowest and best ratio..
| Bank 2021 | Symbol | Deposits Cov |
|---|---|---|
| Bank of Montreal | BMO | 0.95 |
| Bank of Nova Scotia | BNS | 0.93 |
| CIBC | CM | 0.82 |
| Royal Bank | RY | 0.72 |
| National Bank | NA | 0.73 |
| TD Bank | TD | 0.71 |
The last thing I want to cover how much an investor would earn if they bought shares with $1,000 on December 31, 1988. On this basis, Royal Bank is the winner with total return of $32,534.75. BNS is a close second at $31,339.68. (Last year the positions of RY and BNS were reversed.) CIBC had the lowest total return at $15,797.49 with National Bank close at $18,168.55.
| Symbol | Spent | Shares | Worth | Divs Pd | Total |
|---|---|---|---|---|---|
| BMO | $1,000.02 | 142.86 | $13,825.99 | $8,895.89 | $22,721.88 |
| BNS | $998.98 | 273.50 | $18,816.80 | $12,522.88 | $31,339.68 |
| CM | $1,000.06 | 80.78 | $9,182.26 | $6,610.23 | $15,792.49 |
| RY | $1,000.03 | 211.87 | $22,159.48 | $10,375.27 | $32,534.75 |
| NA | $1,000.04 | 173.92 | $12,459.63 | $5,708.92 | $18,168.55 |
| TD | $1,000.00 | 224.72 | $16,161.86 | $7,433.18 | $23,595.04 |
On my other blog I wrote yesterday about Canadian Pacific Railway (TSX-CP, NYSE-CP) ... learn more. Next, I will write about Canadian National Railway (TSX-CNR, NYSE-CNI) ... learn more on Wednesday, February 10, 2021 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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
No comments:
Post a Comment