Tuesday, May 29

More bank action

Another interesting day in banking stocks...

BNS announced it's Q1 results and the market liked them. The stock price was up 50 cents when I checked at 4:15 pm. But there is even better news for dividend investors - BNS also hiked its dividend from 42 to 45 cents. This 7% increase puts the yield at about 3.32% which is higher than all the other banks except BMO. My guess is that the price will start to catch up to this new dividend rate over the next couple months so now may be a good time to watch BNS for a buying opportunity.

TD rose, but the other three banks were down. This makes RY even more attractive, coming on top of Friday's drop. RY was at $58.44 when I checked, which was down 61 cents.

The yields are all over the place now:

BMO: 3.85%
BNS: 3.32%
CM: 2.92%
RY: 3.15%
TD: 2.89%

This is a very different picture from when I first looked at these stocks about 6 weeks ago. There is more variation which probably means pricing inefficiencies. And that could be an opportunity for savvy investors: Let the games begin!

6 comments:

MG (moneygardener) said...

Variation in yield does not necessarily mean pricing inefficiency.

Some banks are weaker than others when it comes to eps growth potential, domestic branch network strenght, foreign growth, and a whole host of other factors.

Higher yields usually mean slower growth in eps in expected. You can either have one or the other, you usually can't have both.

the money diva said...

mg,
Do you think that the eps growth potential of any or all of the 5 banks has changed from six weeks ago? I may have worded it wrong, but my point was that either the market had it wrong back then or it has it wrong now. All of the numbers have changed, not just the yield.
md:)

Anonymous said...

I know the National Bank is really small compared to the big 5 but have you look at NA stock recently? It's close to its 52 weeks high. There is a lot of people speculating on results to be announced at the end of this month. This could be an interesting stock in the future.

Anonymous said...

I think it's also important to look at the payout ratios of the banks if you are going to compare them based on their yeild. Actually, I think I'll post on that tomorrow or Friday. Thanks again for the inspiration MoneyDiva.

Cheers,
MCM
http://middleclassmillionaire.blogspot.com/

Thicken My Wallet said...

I like focusing on dividend payout ratios rather than strict yields. It allows me to see whether there are any more dividend increases coming down the pipe. TD and RY has has a lot of wiggle room to increase dividends.

Anonymous said...

It would be interesting to find a chart that graphs the correlation between interest rates and the performance of Canadian bank stocks. I've heard that back stocks don't perform well when interest rates are rising and with the expectation that the Bank of Canada will raise interest rates at least a few times this year, how will this effect the Big5's performance?