National Bank of Canada

Sound bite for Twitter and StockTwits is: Dividend Growth Bank. Stock price seems reasonable and below the median. So, it is probably a good entry point. There are worries about our housing market so the analysts are rating this a Hold. See my spreadsheet on 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. If I was looking for another bank, I would certainly consider this one. The only reason I do not own it is that I have enough bank stock with the 3 banks I own.

When I was updating my spreadsheet, I noticed the dividend growth has been slowing down. I expected the 10 year growth to be slow because banks coming out of the 2008 all stop increasing their dividends for a while. However, this bank has been slowing lately also lately. However, so has the other banks.

As you can see from the chart below, the dividend growth is slow and it is in the low range at present. The dividend yield is moderate still with the 5, 10 and historical rates at 4.17%, 4.12%, and 3.94%. The current yield is 4.34%. So, the dividend yield is higher than usual.

The Dividend Payout Ratio is 40% with 5 year coverage at 45%. The DPR for CFPS for 2018 is 13.71% with 5 year coverage of 15.26%. The DPR for CFPS excluding WC for 2018 is 45.25% and with 5 year coverage at 39%. These last ratios are a bit high.

The Long Term Debt/Covering Assets Ratio for 2018 is 0.75 with 5 year median also at 0.75. The Debt Ratio for this bank is 1.06. A ratio of 1.04 or higher is good for a bank.

The Total Return per year is shown below for years of 5 to 32 to the end of 2018. 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 charts below.

The return from 10 years ago is so good because the stock price took a real dive in 2008.

From	Years	Div. Gth.	Tot Ret	Cap Gain	Div.
2013	5	7.65%	10.44%	4.87%	5.58%
2008	10	6.91%	20.52%	13.61%	6.91%
2003	15	10.59%	11.02%	6.57%	4.45%
1998	20	10.60%	12.07%	7.83%	4.23%
1993	25	10.45%	14.54%	9.83%	4.71%
1988	30	7.06%	12.05%	7.89%	4.17%
1986	32	7.39%	10.11%	6.63%	3.48%

The 5 year low, median, and high median Price/Earnings per Share Ratios are 9.63, 10.62 and 12.21. The corresponding 10 year ratios are 9.15, 10.39 and 11.76. The corresponding historical ratios are 8.71, 10.05 and 11.76. The current ratio is 9.52 based on a stock price of $59.88 and 2019 EPS estimate of $6.29. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a Graham Price of $69.17. The 10 year low, median, and high median Price/Graham Price Ratios are 0.77, 0.88 and 1.02. The current P/GP Ratio is 0.86 based on a stock price of $59.88. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a 10 year median Price/Book Value per Share Ratio of 1.74. The current P/B Ratio is also 1.74 based on Book Value of $11,526, Book Value per Share of $34.40 and a stock price of $59.88. This stock price testing suggests that the stock price is relatively reasonable and at the median.

I get an historical median dividend yield of 3.94%. The durrent dividend yield is 4.34% based on dividends of $2.60 and a stock price of $59.88. The current dividend yield is 10.20% above the historical median yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.

The 10 year median Price/Sales (Revenue) Ratio is 2.66. The current P/S Ratio is 2.62 based on 2019 Revenue estimate of $7,667M, Revenue per Share of $22.88 and a stock price of $59.88. The current ratio is 1.73% below the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

All the tests are basically saying the same thing, that the stock price testing suggests that the stock price is relatively reasonable and below the median. This shows a good entry point.

When I look at analysts’ recommendations, I find Buy (1), Hold (10), and Underperform (1). The consensus would be a Hold. The 12 month stock price consensus is 66.58. This implies a total return of 15.53% with 11.19% from capital gains and 4.34% from dividends.

Darrell McKinsey on Fairfield Current talks about recent analysts ratings. Paula Sambo on Financial Post says a US Hedge Fund is shorting Canadian banks mainly due to cooling Housing Market . Heidi Stubbs on Simply Wall Street says that this bank is good at forecasting it risks. Joey Frenette on Motley Fool says that the stock is damaged but the bank is pristine. So, it is a good time to buy. See what analysts are saying about this bank on Stock Chase. Ones that do not like it say it is too Canadian-centric.

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 21, 2019 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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