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 that the most recent increases in dividends are higher than in the recent past. The 5 and 10 year dividend increases are 7.65% per year and 6.91% per year. In 2019 the dividends increased by 8.33% and in 2020 financial year so far by 8.08%.
Dividend yields are moderate (2% to 4% ranges). The current dividend is 3.87%. The 5, 10 and historical median dividend yields are 4.17%, 4.12%, and 3.95%. The current dividend increases are low (under 8%). However, these have varied in the past. See the chart below.
The Dividend Payout Ratios are good. The DPR for EPS for 2020 is 41% with 5 year coverage at 45%. The DPR for CFPS is 35% with 5 year coverage at 39%. According to figures from the Morningstar the DPR for Free Cash Flow for 2020 is 33% with 5 year coverage at 18%. I have noticed that FCF can vary by which site I get information from.
Debt Ratios are fine. Since this is a bank, I do not look at the Debt/Market Cap Ratio for at the Debt/Covering Assets Ratio. For this bank that ratio is 0.80. This is a good ratio. The Debt Ratio for 2020 is 1.06. Any ratio at or over 1.04 is considered fine for a bank. The Leverage Debt/Equity Ratios are 18.60 and 17.60. These are normal for a bank.
The Total Return per year is shown below for years of 5 to 33 to the end of 2019. 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. |
|---|---|---|---|---|---|
| 2014 | 5 | 7.65% | 10.62% | 7.83% | 2.79% |
| 2009 | 10 | 6.91% | 12.72% | 9.12% | 3.61% |
| 2004 | 15 | 10.59% | 10.80% | 7.38% | 3.42% |
| 1999 | 20 | 10.60% | 15.29% | 10.81% | 4.47% |
| 1994 | 25 | 10.45% | 16.25% | 11.49% | 4.75% |
| 1989 | 30 | 7.06% | 12.13% | 8.56% | 3.57% |
| 1986 | 33 | 7.39% | 10.25% | 7.23% | 3.02% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 9.04, 10.51, and 11.64. The corresponding 10 year ratios are 9.15, 10.39 and 11.47. The corresponding historical ratios are 8.67, 9.82 and 11.64. The current P/E Ratio is 11.06 based on a stock price of $72.31 and EPS estimate for 2020 of 6.63. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $72.67. The 10 year low, median, and high median Price/Graham Price Ratios are0.77, 0.88 and 0.99. The current P/GP Ratio is 1.01 based on a stock price of $72.31. 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 1.76. The current P/B Ratio is 2.07 based on a Book Value of $11,829, Book Value per Share of $35.40 and a stock price of $72.31. The current P/B Ratio is 18% above the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 3.95%. The current dividend yield is 3.87% based on dividends of $2.84 and a stock price of $72.31. The current yield is 2% below the historical dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10 year median dividend yield is 4.12%. The current dividend yield at 3.87% is some 7% below this. 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 2.78. The current P/S Ratio is 3.07 based on 2020 Revenue estimate of $7,981M, Revenue per Share of $23.88 and a stock price of $72.31. The current ratio is 10% above the 10 year median. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is reasonable to expensive. All the testing is show that the stock price is reasonable but above the median or expensive. I see no problems with any of the tests.
Is it a good company at a reasonable price? This is a dividend growth stock and it has done well for its shareholders in the past and will probably be a good stock going forward. The stock price is a bit high at the present time but it is still within a reasonable range.
When I look at analysts’ recommendations, I find Buy (1), Hold (9), Underperform (2), Sell (1) and No Opinion (1). The consensus would be a Hold. The 12 month stock price is $71.96. This implies a total return of 2.03% with a capital loss of 1.84% and dividends of 3.87%.
See what analysts are saying on Stock Chase. They generally like this bank. One says it has a profitable niche in Quebec. Matt Smith on Motley Fool says this is the only bank to beat the market in 2019 and is poised for strong growth in 2020. A writer on Simply Wall Street says positive things, but would like it better if there were more insider buying. A writer on Simply Wall Street thinks this is a good dividend paying stock. Maria Luz-Campos on Riverton Roll talks about recent analysts’ recommendations on this stock.
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, 2020 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 website for stocks followed and investment notes. 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 or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
Good to see that you are covering national bank. In fact, from my research, the 3 better dividend growth banks are td, rbc, NA.
ReplyDeleteThe downside of NA is that it's Quebec focused. Hence, not as well diversified.
RN