National Bank of Canada

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.

During 2008 this bank had a small dividend increase of 3.3%, then for 2009 and 2010 the dividend was flat. Dividends were raised a couple of times in 2011 with the total increase being at 14.5%. So this relatively smaller bank did very well during the 2008 crisis. The 5 and 10 dividend increase is at 6.2 and 12.1% per year.

The current dividend rate is 4.15%. At the last dividend increase was in 2014 and was for 5.7%. However, this bank often raises dividends more than once per year. Currently it looks like in the 2014 financial year dividends will be increased by 9.34%. At this rate, you could expect to be earning a dividend yield around 10% in 10 years' time and maybe 16% in 15 years' time.

The 5 year median Dividend Payout Ratios are 39% for earnings and 35% for cash flow. The DPR ratio looks to be about 41% for earnings. No one gives estimates for banks on cash flow, so I have no estimates for DPR for cash flow for 2014.

As far as total returns go, shareholders have done quite well over the past 5 and 10 years with total returns of 29.62% and 11.46% per year over the past 5 and 10 years. The dividend portion of this return would be 6.55% and 4.02% per year over the past 5 and 10 years. The capital gain portion of this return would be 23.08% and 7.44% per year over the past 5 and 10 years.

The outstanding shares have increased by less than 1% per year over the past 5 years and decreased by less than 1% over the past 10 years. Shares have increased due to Stock Options and Share Issues and decreased due to Buy Backs. Growth in earnings has been quite good and growth in cash flow was mostly good. There was lower growth in revenue.

Revenue per Share is up by 6.8% and 5.1% per year over the past 5 and 10 years. Earnings per Share growth is up by 13.5% and 10% per year over the past 5 and 10 years. Cash Flow is up by 13% and 11% per year over the past 5 and 10 years. However, for cash flow, if you look at 5 year running averages, the growth is lower at 9.9/% and 2.3% per year over the past 5 and 10 years. Cash flow does fluctuate, but exactly 10 years ago the cash flow was lower in the previous years.

I have Return on Equity Ratios going back to 1994 and only 3 years had an ROE under 10% and in all years the ROE was over 9%. The ROE for the 2013 financial year was 17% with the 5 year median ROE at 14.5%. For the 2013 financial the ROE on comprehensive income was close to the ROE on net income with an ROE at 17.1%. The comprehensive income and net incomes have varied but over all they are close with a 5 year median ROE on comprehensive income at 14.3%.

The Debt Ratio is ok at 1.05 but this is lower than the other banks I have covered which have Debt Ratios of 1.06 to 1.08. The Leverage and Debt/Equity Ratios have remained higher on this bank with ratios at 20.54 and 19.54. Other banks have lowered their ratios closer 16.00 and 15.00 and their ratios are lower than their 5 year median ratios. Whereas for this bank the 5 year ratios at 19.81 and 18.81 are lower than the current ratios.

This bank has done relatively well through the 2008 crisis and to today. However Debt Ratios are a bit higher than the other banks I have reviewed. See my spreadsheet at na.htm.

This is the first of two parts. The second part will be posted on Monday, January 27, 2014 and will be available here.

National Bank of Canada provides financial services to consumers, small and medium-sized enterprises, and large corporations & has branches in every province in Canada. It is also represented in the U.S. and Europe through its subsidiaries and alliances. It is also represented in the U.S. and Europe through its subsidiaries and alliances. Its web site is here National Bank.

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. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.