National Bank of Canada

Sound bite for Twitter and StockTwits is: Dividend Growth Bank. The stock price is probably expensive. The current P/S Ratio seems quite high. This is the smallest bank of the big 6, but it has done fairly well for shareholder over time. See my spreadsheet on National Bank of Canada.

Is it a good company at a reasonable price? The stock price is probably expensive as the 10 year dividend yield test and the P/S Ratio test do agree on this. This is the smallest Canadian Bank of the top 6, but it has done well by shareholders in the past. I like all Canadian Banks.

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 you had invested in NA in December 1988, $1,000.50 you would have bought 174 Shares. In December 2021, after 32 years you would have received $6,205.71 in dividends. The stock would be worth $16,780.56. Your total return would have been $22,986.27.

Cost	Tot. Cost	Shares	Years	Dividends	Stock Val	Tot Ret
$5.75	$1,000.40	174	32	$6,205.71	$16,780.56	$22,986.27

When I was updating my spreadsheet, I noticed that analysts expected an EPS for 2021 of $6.58 an 15% increase but EPS came in at $8.96, an 57% increase.

The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 3.49%. The 5, 10 and historical dividend yields are also moderate at 4.53%, 4.17% and 3.95%. The current dividend growth is low (below 8%) at 7.04% per year over the past 5 year. The last dividend increase was in 2021 and it was for 22.5%. However, this bank, like the others, went one year without any increases.

The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2021 was 32% with 5 year coverage at 40%. The DPR for Cash Flow per Share for 2021 was 16% with 5 year coverage at 10%. The DPR for Free Cash Flow for 2021 is 20% with 5 year coverage at 13%. Site do not agree what the FCF is, but all the coverage values are fine.

Debt Ratios are fine. Because this is a bank, I am looking at the Long Term Debt/ Covering Assets Ratio for 2021 and it is good at 0.73. The other important debt ratio for banks is the debt ratio. For this bank it is 1.06 and for banks a value at or above 1.04 is fine.

The Total Return per year is shown below for years of 5 to 35 to the end of 2021. 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.
2016	5	7.04%	17.13%	12.08%	5.05%
2011	10	8.52%	15.49%	10.90%	4.58%
2006	15	8.47%	11.06%	7.43%	3.63%
2001	20	10.67%	13.93%	9.81%	4.13%
1996	25	11.15%	15.62%	11.11%	4.51%
1991	30	6.71%	13.55%	9.77%	3.78%
1986	35	7.22%	10.78%	7.70%	3.08%

The 5 year low, median, and high median Price/Earnings per Share Ratios are 7.31, 9.70 and 11.64. The corresponding 10 year ratios are 8.45, 9.83 and 11.64. The corresponding historical ratios are 8.38, 9.82 and 11.64. The current P/E Ratio is 11.06 based on a stock price of $99.75 and EPS estimate for 2022 of $9.02. The current ratio is between the median and high of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a Graham Price of $97.73. The 10 year low, median, and high median Price/Graham Price Ratios are 0.76, 0.87 and 1.02. The current ratio is 1.02 based on a stock price of $99.75. The current ratio is at the high ratio of the 10 year median ratios. 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 2.12 based on a Book Value of $15,903M, Book Value per Share of $47.06 and a stock price of $99.75. The current P/B Ratio is 21% above the 10 year median ratio. 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. A current P/B Ratio is 1.89 based on a Book Value per Share estimate for 2022 of $52.70, Book Value of $17,808M, and a stock price of $99.75. The current P/B Ratio is7.7% 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 3.68. The current P/CF Ratio is 5.51 based on last 12 months Cash Flow of $6,113M, Cash Flow per Share of $18.09 and a stock price of $99.75. The current ratio is 50% 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 3.95. The current dividend yield is 3.49% based on a stock price of $99.75 and dividends of $3.45. The current dividend yield is 12% below the historical median ratio. 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 4.17. The current dividend yield is 3.49% based on a stock price of $99.75 and dividends of $3.45. The current dividend yield is 20.1% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.

The 10 year median Price/Sales (Revenue) Ratio is 2.82. The current P/S Ratio is 3.55 based on a stock price of $99.75, Revenue estimate for 2022 of $9,499M and Revenue per Share of $28.11. The current ratio is 26% 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 is probably expensive. The 10 year median dividend yield test points to an expensive stock price and so does the P/S Ratio. All the tests point to a stock price above the median or expensive.

I look at the total return over a number of years. For P/S Ratio and P/E Ratio, the lower the ratio the cheaper the stock. For yield, the higher the yield, the cheaper the stock. In the it would seem that the current P/E Ratio and P/S Ratios are a bit high and the dividend yield rather low. You can see that the current P/S Ratio is quite high comparatively.

In the following chart the capital gains for the 10 years to December 31, 2021 is 10.90% per year. The beginning yield was at 3.73%, and the P/E Ratio and the P/S Ratio were at 10.00 and 2.49. Does this chart change my opinion of the stock price? Not really. The current ratios seem on the high side and the dividend yield on the low side.

# Years	Cap Gains	Beg P/E	Beg P/S	Beg Yield
5	12.08%	16.57	2.77	4.49%
10	10.90%	10.00	2.49	3.73%
15	7.43%	12.83	2.57	3.10%
20	9.81%	10.68	1.48	3.30%
25	11.11%	8.98	0.96	3.64%
30	9.77%	7.34	0.67	11.22%
35	7.70%			3.47%
Current		11.06	3.55	3.49%

When I look at analysts’ recommendations, I find Buy (2) Hold (7) and Underperform (2). The consensus would be a Hold. The 12 month stock price consensus is $107.55. This implies a total return of 11.31% with 7.82% from capital gains and 3.49% from dividends based on a current stock price of 99.75.

When I looked at analysts’ recommendations last year, I found 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 based on a stock price of $73.22. What happen was a total return of 40.11% with 36.23% from capital gains and 3.88% from dividends as stock price moved to $99.75. I said last year that the stock price was reasonable, but at the high end of the reasonableness range.

Most, but not all analysts on Stock Chase like this bank. Adam Othman on Motley Fool thinks this bank is relatively undervalued. Chris MacDonaldMotley Fool says this is the bank he has his eye on right now. The bank reports on its fourth quarter via Newswire. Simply Wall Street talks about dividends by this bank via Yahoo Finance.

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 Friday, January 21, 2022 around 5 pm. Tomorrow on my other blog I will write about Reviewing Last Year .... learn more on Thursday, January 20, 2022 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.