Is it a good company at a reasonable price? I think that this bank has done well for its shareholders over the longer term. Analysts do not say anything bad about this bank, they just seem to prefer other banks to this one. It is the smallest bank of the big 6 banks in Canada. The stock price still seems reasonable, but it is above the median.
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 shareholders have done very well with this stock. If you bought it 10 years ago, you total return would be 13.27% with 8.98% from capital gains and 4.29% from dividends. See charts below.
If you had invested in this company in December 2012, for $1,004.12 you would have bought 26 shares at $38.62 per share. In December 2022, after 10 years you would have received $621.27 in dividends. The stock would be worth $2,371.98. Your total return would have been $2,993.25.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $38.62 | $1,004.12 | 26 | 10 | $621.27 | $2,371.98 | $2,993.25 |
If you had invested in this company in December 1988, for $1,000.50 you would have 174 shares with a cost $5.75 per share. In December 2022, after 34 years you would have received $6,792.09 in dividends. The stock would be worth $15,874.02. Your total return would have been $22,666.11.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $5.75 | $1,000.50 | 174 | 34 | $6,792.09 | $15,874.02 | $22,666.11 |
The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 3.98%. The 5, 10 and historical median dividend yields are also moderate at 4.23%, 4.17% and 3.94%. The current dividend growth is low (below8%) at 5.7% per year over the past 5 years. The last dividend increase was for 2023 and it was for 5.4%.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2022 is 35% with 5 year coverage at 38%. The DPR for Adjusted Earnings per Share (AEPS) for 2022 is 35% with 5 year coverage at 39%. The DPR for Cash Flow per Share (CFPS) for 29% with 5 year coverage at 33%. The DPR for Free Cash Flow (FCF) could be 39% with 5 year coverage at 23%. (There is a big disagreement on what the FCF is.)
Debt Ratios are fine. Because this is a bank, I am looking at the Long Term Debt/Covering Assets Ratio and for 2022 it is 0.71 and this is good. I get a Liquidity Ratio for 2022 at 9.53. This is not considered important for banks. The Debt Ratio for 2022 is 1.06 and this is considered acceptable for banks.
The Total Return per year is shown below for years of 5 to 36 to the end of 2022. 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. |
|---|---|---|---|---|---|
| 2017 | 5 | 5.72% | 11.94% | 7.78% | 4.16% |
| 2012 | 10 | 7.92% | 13.27% | 8.98% | 4.29% |
| 2007 | 15 | 7.57% | 12.92% | 8.69% | 4.23% |
| 2002 | 20 | 10.30% | 13.32% | 9.04% | 4.27% |
| 1997 | 25 | 10.53% | 12.21% | 8.53% | 3.68% |
| 1992 | 30 | 6.75% | 15.78% | 10.92% | 4.85% |
| 1987 | 35 | 6.93% | 12.25% | 8.39% | 3.86% |
| 1986 | 36 | 7.04% | 10.47% | 7.31% | 3.16% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 8.65, 9.81 and 11.77. The corresponding 10 year ratios are 8.66, 9.88 and 11.64. The corresponding historical ratios are 8.52, 9.81 and 11.64. The current ratio is 10.19 based on a stock price of $97.46 and EPS estimate for 2023 of $9.56. The current ratio is between the median and 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 8.64, 9.67 and 10.97. The corresponding 10 year ratios are 8.65, 9.75 and 11.34. The current P/AEPS Ratio is 10.12 based on a stock price of $97.46 and AEPS estimate for 2023 of $9.63. The current ratio is between the median and high ratios 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 $109.41. The 10-year low, median, and high median Price/Graham Price Ratios are 0.75, 0.87 and 1.00. The current ratio is 0.89 based on a stock price of $97.46. The current ratio is between the median and high ratios 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 1.72. The current P/B Ratio is 1.76 based on a stock price of $97.46, Book Value of $18,954M, and Book Value per Share of $55.24. The current ratio is 2.45% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I also have a Book Value per Share estimate for 2023 of $60.70. This would imply a ratio of 1.61 with a stock price of $97.46 and Book Value of $20,430M. This P/B Ratio is 7% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 3.09. The current P/CF Ratio is negative, so I cannot do any P/CF Ratio testing.
I get an historical median dividend yield of 3.94%. The current dividend yield is 3.98% based on dividends of $3.88 and a stock price of $97.46. The current ratio is 1% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median dividend yield of 4.17%. The current dividend yield is 3.98% based on dividends of $3.88 and a stock price of $97.46. The current ratio is 6% below the 10 year median 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 2.96. The current P/S Ratio is 3.12 based on Revenue estimate for 2023 of $10,520M, Revenue per Share of $31.26 and a stock price of $97.46. The current ratio is 5% above the 10 year median 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 probably reasonable, but it is above the median. The 10 year median dividend yield test says this and it is confirmed by the P/S Ratio test. Most of the other testing is say the same thing.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (6), Hold (4) and Underperform (2). So, the recommendations are quite diverse. The consensus would be a Buy. The 12 month stock price of $103.88. This implies a total return of 10.57% with 6.59% from capital gains and 3.98% from dividends based on a current stock price of $97.46.
Some Analysts on Stock Chase think it is doing well, and some do not. Stock Chase gives this stock 4 stars out of 5. It is on the Money Sense list with a B rating. Kay Ng on Motley Fool says it is the best performing Canadian Bank. Joey Frenette on Motley Fool says this stock is too cheap to ignore. The company put out a press release via Newswire about their fourth quarter for 2022. Simply Wall Street via Yahoo Finance reviews this stock. Simply Wall Street gives this stock 4 starts out of 5 and lists no risks.
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 20, 2023 around 5 pm. Tomorrow on my other blog I will write about Pason Systems .... learn more on Thursday, January 19, 2023 around 5 pm.
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