Is it a good company at a reasonable price? This stock has done well for shareholders in the past and there is no reason to think it will not continue to do well in the future. It is the smallest bank of the big 6 Canadian banks. Stock price testing is suggests that this bank is still selling at a reasonable price.
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 than even though this is one of Canadian’s smaller banks, it has done quite well. See chart on Total Return below.
If you had invested in this company in December 2013, for $1,016.49 you would have bought 23 shares at $44.20 per share. In December 2023, after 10 years you would have received $600.65 in dividends. The stock would be worth $2,323.00. Your total return would have been $2,923.65. This is a total return would be a total return of 12.60% per year with 12.50% from capital gain and 3.98% from dividends. These calculations take into consideration stock splits.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $44.20 | $1,016.49 | 23 | 10 | $600.65 | $2,323.00 | $2,923.65 |
If you had invested in this company in December 1993, for $1,005.13 you would have bought 187 shares at $5.38 per share. In December 2023, after 30 years you would have received $7,697.86 in dividends. The stock would be worth $18,887.00. Your total return would have been $26,584.86. This is a total return would be a total return of 14.61% per year with 10.27% from capital gain and 4.34% from dividends. This calculation takes into consideration stock splits, which means that the original cost would be lowered by these splits.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $5.38 | $1,005.13 | 187 | 30 | $7,697.86 | $18,887.00 | $26,584.86 |
The current dividend yield is moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 4.25%. The 5, 10 and historical dividend yields are all moderate at 3.85%, 4.13% and 3.90%. The dividends increases are moderate (8% to 14% ranges) at 10.1% per year over the past 5 years. The last dividend increase was in 2024 and it was for 3.9%. However, this bank generally raises dividends 3 times each year.
The Dividend Payout Ratios (DPR) are good. The DPR for 2023 for Earnings per Share (EPS) is good at 41% with 5 year coverage at 39%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is good at 40% with 5 year coverage at 39%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 25% with 5 year coverage at 14%m but generally this one is not considered important for banks. The DPR for 2023 for Free Cash Flow (FCF) is different depending where you look. It is good from Morningstar at 33% with 5 year coverage at 18%. For Wall Street Journal, the current one of 43% is good. It is not unusual to have different site give different values, unfortunately.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 41.36% | 38.76% |
| AEPS | 40.42% | 38.95% |
| CFPS | 25.41% | 13.85% |
| FCF MS | 33.25% | 17.92% |
| FCF WSJ | -27.42% | 43.05% |
Debt Ratios are fine. The Long Term Debt/Covering Assets Ratio for 2023 is good at 0.73. This is the important one rather than the Long Term Debt/Market Cap Ratio. The Liquidity Ratio for 2023 is a bit low at 10.73, but is not important. The Debt Ratio for 2023 is fine for banks at 1.06.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R A | 0.73 | 0.73 |
| Lg Term R | 9.88 | 8.54 |
| Intang/GW | 0.10 | 0.08 |
| Liquidity | 10.73 | 10.73 |
| Liq. + CF | 11.76 | 11.73 |
| Debt Ratio | 1.06 | 1.06 |
The Total Return per year is shown below for years of 5 to 37 to the end of 2023. 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. |
|---|---|---|---|---|---|
| 2018 | 5 | 10.08% | 16.83% | 12.50% | 4.34% |
| 2013 | 10 | 8.86% | 12.60% | 8.62% | 3.98% |
| 2008 | 15 | 7.96% | 19.14% | 13.24% | 5.91% |
| 2003 | 20 | 10.47% | 11.80% | 8.02% | 3.78% |
| 1998 | 25 | 10.50% | 12.49% | 8.75% | 3.74% |
| 1993 | 30 | 10.39% | 14.61% | 10.27% | 4.34% |
| 1988 | 35 | 7.49% | 12.31% | 8.53% | 3.77% |
| 1986 | 37 | 7.75% | 10.51% | 7.40% | 3.11% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 8.65, 9.81 and 11.24. The corresponding 10 year ratios are 8.85, 10.23 and 11.64. The corresponding historical ratios are 8.65, 9.82 and 11.64. The current P/E Ratio is 10.45 based on a stock price of $99.73 and EPS of $9.54. The current P/E 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 8.64, 9.67 and 10.98. The corresponding 10 year ratios are 8.65, 9.75 and 11.24. The current P/AEPS Ratio is 10.42 based on a stock price of $99.73 and AEPS of $9.57. 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 $114.30. The 10-year low, median, and high median Price/Graham Price Ratios are 0.75, 0.87 and 0.99. The current P/GP Ratio is 0.87 based on a stock price of $99.73. The current ratio is at the median value of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and at the median.
I get a 10-year median Price/Book Value per Share Ratio of 1.71. The 1.64 based on a Book Value of $20,526M, Book Value per Share of $60.68 and a stock price of $99.73. The current ratio is 4% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have a Book Value per Share estimate for 2024 of $65.50. This implies a P/B Ratio of 1.52 based on a stock price of $99.73 and Book Value of $22,158M. This ratio is 11% 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 6.53 based on a stock price of $99.73, Cash Flow for last 12 months of $6,901M and Cash Flow per Share of $15.27. This ratio is 111% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. However, analysts do tend to ignore Cash Flow for banks.
I get an historical median dividend yield of 3.90%. The current dividend yield is 4.25% based on dividends of $4.24 and a stock price of $99.73. The current dividend yield is 9% 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 4.13%. The current dividend yield is 4.25% based on dividends of $4.24 and a stock price of $99.73. The current dividend yield is 2.1% above the 10 year median dividend 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 2.96. The current P/S Ratio is 3.06 based on Revenue estimate for 2024 of $11,024, Revenue per Share of $32.59 and a stock price of $93.73. The current ratio is 3.2% 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. The dividend yield tests say that the stock price is reasonable and below the median. The P/S Ratio test says that the stock price is reasonable but above the median. The rest of the testing is basically showing the stock price as reasonable and above or below the median.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (2) and Hold (7). The consensus would be a Buy. The 12 months stock price consensus is $103.18 with a high of $107.00 and low of $96.00. The consensus price of $103.18 implies a total return of 7.71% with 3.46% from capital gains and 4.25% from dividends.
The two recommendations on Stock Chase for 2024 are a Hold and a Buy. Stock Chase gives this stock 4 stars out of 5. This bank is on the dividend lists I follow. Aditya Raghunath on Motley Fool says this is a stock to buy and hold forever. Joey Frenette on Motley Fool says value investors should appreciate this stock. The company put out a Press Release on Newswire about their 2023 year end results.
Simply Wall Street via Yahoo Finance reviews this bank and its dividend. Simply Wall Street gives this bank 3 and one half stars. They list 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 19, 2024 around 5 pm. Tomorrow on my other blog I will write about Dividend Beginner .... learn more on Thursday, January 18, 2024 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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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