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 I have shown the return you would have received if you bought $1000 of shares in December 1988. You would have been able to buy 173.91 shares at $5.75. In December 2020, you have received to date $5,708.92 in dividend and the share would be worth $12,459.63.
The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 3.88%. The 5, 10 and historical dividend yields are also moderate at 4.23%, 4.12% and 3.96%. The dividends have been increasing at a low level (below 8%) at 7.22% per year over the past 5 years. The last dividend increase was in 2020 and the increase was for 4.41%.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2020 was 49% with 5 year coverage at 46%. The DPR for CFPS for 2020 was 39% with 5 year coverage at 34%. The DPR for Free Cash Flow for 2020 could be 7% with 5 year coverage at 11%, but sites showing FCF do not agree at all.
Debt Ratios are fine. Because this is a bank, I am looking at Long Term Debt/Covering Assets Ratio which for 2020 is 0.73. The Liquidity Ratio for banks is not important. The Debt Ratio for this bank is 1.05 and for banks anything at 1.04 or higher is fine, but it is lower currently than the other banks.
The Total Return per year is shown below for years of 5 to 34 to the end of 2020. 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. |
|---|---|---|---|---|---|
| 2015 | 5 | 7.22% | 14.68% | 12.19% | 2.50% |
| 2010 | 10 | 7.68% | 10.83% | 7.66% | 3.17% |
| 2005 | 15 | 9.57% | 8.97% | 5.94% | 3.04% |
| 2000 | 20 | 10.63% | 12.62% | 8.78% | 3.83% |
| 1995 | 25 | 10.80% | 15.49% | 10.76% | 4.73% |
| 1990 | 30 | 6.91% | 14.91% | 10.10% | 4.82% |
| 1986 | 34 | 7.19% | 10.04% | 7.00% | 3.04% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 8.67, 9.93 and 11.64. The corresponding 10 year ratios are 8.85, 10.23 and 11.76. The corresponding historical ratios are 8.53, 9.89 and 11.76. The current P/E Ratio is 11.13 based on a stock price of $73.22 and EPS estimate for 2021 of $6.58. This stock price testing suggests that the stock price is relatively reasonable but above the median.
If you look at P/E Ratios compared to Total Returns for the 5, 10, 15, 20, 25, and 30 year periods, I find the following. For example, total return over the past 15 years is 8.97% per year, the starting P/E Ratio (the one from 15 years ago) was 12.31. From the point of view of this chart, a P/E Ratio of 11.13 would still be fine.
| Year | Tot Return | Start P/E |
|---|---|---|
| 5 | 14.68% | 8.94 |
| 10 | 10.83% | 11.54 |
| 15 | 8.97% | 12.31 |
| 20 | 12.62% | 10.56 |
| 25 | 15.49% | 8.98 |
| 30 | 14.91% | 7.34 |
I get a Graham Price of $75.90. 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 0.96 based on a stock price of $73.22. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Book Value per Share Ratio of 1.76. The current P/B Ratio is 1.88 based on a stock price of $73.22, Book Value of $13,075 and a Book Value Per Share of $38.91. 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 1.23 based on last 12 month Cash Flow of $19,981, Cash Flow per Share of $59.47 and a stock price of $73.22. The current ratio is 60% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap. However, Cash Flow is quite volatile and this makes this a questionable check for the stock price for this stock. For example, the last 10 years of Cash Flow are -$5,477, $5,993, $2,177, $690, $4,147, $6,375, $5,438, $1,521, $5,864, $8,280, and $19,981.
I get an historical median dividend yield of 3.96%. The current dividend yield is 3.88% based on a stock price of $73.22 and dividends of $2.84. The current dividend yield is 2% below the historical 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 4.12%. The current dividend yield is 3.88% based on a stock price of $73.22 and dividends of $2.84. The current dividend yield is 6% 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 Price/Sales (Revenue) Ratio is 2.78. The current P/S Ratio is 2.99 based on Revenue estimate for 2021 of $8,240M, Revenue per Share of $24.52 and a stock price of $73.22. The current ratio is 7% above the 10 year ratio. 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, but above the median. Both the dividend yield tests say this and it is confirmed by the P/S Ratio test. The P/E Ratio, P/GP Ratio and P/B Ratio tests are all good tests and they show the same thing.
Is it a good company at a reasonable price? The stock price is in the reasonable range, but at the high end. This is a dividend growth stock which is the kind I like. However, since this is a smaller bank than the big 5, it is probably riskier.
When I look at analysts’ recommendations, I find Buy (3) and Hold (9). The consensus would be a Hold. The 12 month stock price consensus is $77.88. This implies a total return of 10.24% with 6.36% from capital gains and 3.88% from dividends.
The three latest analyst’s signals are Buy, Strong Buy and Top Picks for this bank on Stock Chase. Christopher Liew on Motley Fool thinks this bank is a current buy. The executive summary on Simply Wall Street give this bank 4 stars out of 5 and list no risk items. A writer on Simply Wall Street says that this stock is a promising Dividend Stock. Norman Levine discusses National Bank versus Laurentian Bank on BNN. The blogger Dividend Earner has done a recent review 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 Wednesday, January 20, 2021 around 5 pm. Tomorrow on my other blog I will write about Not All Investments Need to be Winners.... learn more on Tuesday, January 19, 2021 around 5 pm.
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Missing a word somewhere(10 year?): I get an historical median dividend yield of 3.96%. …
ReplyDeleteI get an historical median dividend yield of 4.12%.
You are correct and I fixed the post.
ReplyDelete