Is it a good company at a reasonable price? When I look at analysts’ recommendation, there is one sell recommendation. The only negative comment I can find is that one analyst says that he preferred other banks to this one and names mentions were BNS and TD. This bank and delivered nice returns to their shareholders in the past. If you look at its chart it is quite close to the highest price it has reached. It might currently be on the expensive side.
I do not own this stock of National Bank of Canada (TSX-NA, OTC-NTIOF). I thought I should follow one of the smaller Canadian Banks. This seems like a good choice.
When I was updating my spreadsheet, I noticed they give an Adjusted Net Income, but not the final Adjusted Net Income. I only discovered this when I tried to calculate the Adjusted Basic Earnings per Share, which seemed off compared to the given Adjusted Diluted Earnings per Share. I find things like that annoying.
I also noticed Dividend growth is increasing and it has been over the last 15 years. Dividend growth was 8.54% per year for the last 15 years, 8.74% per year over the past 10 years and 10.28% over the past 5 years to 2024. Both the dividend yield and the dividend growth are moderate and this is where a good dividend growth stock should be.
If you had invested in this company in December 2014, for $1,038.24 you would have bought 21 shares at $49.44 per share. In December 2024, after 10 years you would have received $598.92 in dividends. The stock would be worth $2,751.84. Your total return would have been $3,350.76. This would be a total return of 13.87% per year with 10.24% from capital gain and 3.63% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $49.44 | $1,038.24 | 21 | 10 | $598.92 | $2,751.84 | $3,350.76 |
The current dividend yield is moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 3.54%. The 5, 10 and historical dividend yields are also moderate at 3.71%, 4.01% and 3.85%. The last dividend increase was in 2025 and it was for 3.64. However, this bank generally does more than 1 increase each year. The dividends for 2024 were 9.3% higher than for 2023. The dividend increases are moderate (8% to 14% ranges) and they were increased by 10.3% per year over the past 5 years.
The Dividend Payout Ratios (DPR) are good. The DPR for 2024 for Earnings per Share (EPS) is good at 40% with 5 year coverage at 39%. The DPR for 2024 for Adjusted Earnings per Share (AEPS) is good at 41% with 5 year coverage at 39%. The DPR for 2024 for Cash Flow per Share (CFPS) is good at 31% with 5 year coverage at 17%. The DPR for 2024 for Free Cash Flow MS (FCF) is good at 44% with 5 year coverage at 43%. The DPR for 2024 for Free Cash Flow WSJ (FCF) is non-calculable because of negative FCFs with 5 year coverage too high at 80%. There is a huge difference in what sites say for FCF, again. I generally tend to discount the FCF values.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 39.70% | 38.66% |
| AEPS | 40.81% | 38.94% |
| CFPS | 31.06% | 17.01% |
| FCF MS | 43.73% | 42.56% |
| FCF WSJ | -57.14% | 80.10% |
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2024 is high at 7.37 and currently at 7.39. However, we need also to look at the Long Term Debt/Covering Assets Ratio for 2024 which is good at 0.76 and currently at 0.76 because this is a more important one for a financial. The Liquidity Ratio for 2024 is good at 9.90 and 9.90 currently. But this is not important for a financial. The Debt Ratio for 2024 is fine at 1.06 and 1.06 currently for a bank. The bank gives a Leverage Ratio of 4.4% and this is good. The Debt/Equity Ratios for 2024 are fine at 17.09 and currently at 17.09.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R A | 0.76 | 0.76 |
| Lg Term R | 7.37 | 7.39 |
| Intang/GW | 0.06 | 0.06 |
| Liquidity | 9.90 | 9.90 |
| Liq. + CF | 10.76 | 10.74 |
| Debt Ratio | 1.06 | 1.06 |
| Leverage Bk | 4.4% | 4.4% |
| Leverage | 18.09 | 18.09 |
| D/E Ratio | 17.09 | 17.09 |
The Total Return per year is shown below for years of 5 to 38 to the end of 2024. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2019 | 5 | 10.28% | 16.40% | 12.70% | 3.70% |
| 2014 | 10 | 8.74% | 13.87% | 10.24% | 3.63% |
| 2009 | 15 | 8.54% | 14.12% | 10.30% | 3.82% |
| 2004 | 20 | 9.75% | 12.12% | 8.68% | 3.43% |
| 1999 | 25 | 10.56% | 15.61% | 11.19% | 4.42% |
| 1994 | 30 | 10.72% | 16.39% | 11.69% | 4.70% |
| 1989 | 35 | 7.39% | 12.60% | 9.14% | 3.46% |
| 1986 | 38 | 7.79% | 10.83% | 7.94% | 2.90% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 8.16, 9.96 and 11.64. The corresponding 10 year ratios is 8.66, 10.16 and 11.64. The corresponding historical ratios. are 8.52, 9.89 and 11.64. The current P/E Ratio is 12.38 based on a stock price of $128.79 and EPS estimate for 2025 of $10.40. The current ratio is above the high ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 8.38, 9.81 and 11.76. The corresponding 10 year ratios is 8.55, 9.75 and 11.24. The current P/AEPS Ratio is 12.41 based on a stock price of $128.79 and AEPS estimate for 2025 of $10.38. This ratio is above the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $123.91. The 10-year low, median, and high median Price/Graham Price Ratios are 0.72, 0.87 and 0.99. The current P/GP Ratio is 1.04 based on a stock price of $128.79. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Book Value per Share Ratio of 1.70. The current P/B Ratio is 1.96 based on a Book Value of $22,400M, Book Value per Share of $65.74 and a stock price of $128.79. The current ratio is 15% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I also have a Book Value per Share estimate for 2025 of $71.79. This implies a ratio of 1.79 based on a stock price of $128.79 and Book Value of $24,462M. This ratio is 5% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 3.09. The current P/CF Ratio is 9.43 based on Cash Flow for the last 12 months of $4,652M, Cash Flow per Share of $13.65 and a stock price of $128.79. This ratio is 205% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 3.85%. The current dividend yield is 3.54% based on a stock price of $128.79 and Dividends of $4.56. The current dividend yield is 8% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median dividend yield of 4.01%. The current dividend yield is 3.54% based on a stock price of $128.79 and Dividends of $4.56. The current dividend yield is 12% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10-year median Price/Sales (Revenue) Ratio is 2.85. The current P/S Ratio is 3.42 based on a stock price of $128.79, Revenue estimate for 2025 of $12,814M and Revenue per Share of $37.61. The current ratio is 20.1% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price could be on the expensive side. The dividend yield testing is saying that the stock price is reasonable but above the median. It is not confirmed by the P/S Ratio test which says that the stock price is relatively expensive. A number of my tests says that the stock price is relatively expensive.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (1), Hold (8) and Sell (1). The consensus would be a Hold. The 12 month stock price consensus is $140.50 and with high of $154.00 and low of $109.00. The 12 month consensus price of $140.50 implies a total return of 12.63% with 9.09% from capital gains and 3.54% from dividends.
There are no entries yet on Stock Chase for 2025. The ones for 2024 are either Buys or Holds. They all make positive remarks about this bank. Stock Chase gives this stock 5 stars out of 5. Christopher Liew on Motley Fool says this is a good bank to buy at present. Adam Othman on Motley Fool thinks this is a stock to buy and hold forever. The bank put out a press release via Newswire about their fourth quarter of 2024.
Simply Wall Street via Yahoo Finance and looks at their effort to buy Canadian Western Bank. Simply Wall Street gives this stock 4 stars out of 5. Simply Wall Street gives this stock 1 warnings of earnings are forecast to decline by an average of 1% per year for the next 3 years.
National Bank of Canada is the sixth-largest Canadian bank. The bank offers integrated financial services, primarily in the province of Quebec as well as the city of Toronto. Operational segments include personal and commercial banking, wealth management, and a financial markets group. Its web site is here National Bank of Canada.
The last stock I wrote about was about was Bank of Nova Scotia (TSX-BNS, NYSE-BNS) ... learn more. The next stock I will write about will be Canadian Imperial Bank of Commerce (TSX-CM, NYSE-CM) ... learn more on Monday, January 20, 2025 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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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