Thursday, February 11, 2016

Plan for Bears

You cannot time the market. You will not know ahead of time when the market will be moving up or down. But, the fact is we have had bear markets in the past and will have then in the future. It is just we never know when or how bad any bear market will be. The thing is, if you are in a market there will be times of expansion and times of contraction.

If you own a house or a condo, you should know at the least about the last two bear markets in real estate in your area. You should have at least an idea on how you would handle such a time.

I am into stocks. I have been through a number of bear markets. I expect to go through bear markets in the future. I just do not know when.

I see lots of newsletters saying that they know people who had tried to ride out a bear market and have lost money. Of course the value of your portfolio will go down in a bear market. But, you only lose if you sell and turn paper loses into real losses. Newsletters that promise to help you sell to protect you from such a lose make money by selling you a newsletter.

No one knows when to sell. No one can tell when the top or the bottom of a market is. The only thing that is possible to know is if the market is relatively high or relatively low.

If you have basic solid companies you will have no problems going through a bear market. I have done it many times. Do not panic and sell. The other thing that happens in bear markets is some dividend stock cut or cancels their dividends. This will happen in every bear market. However, other dividend stocks keep their dividends level and some raise theirs. What I have found in bear markets is that dividend increases for my portfolio slows down.

If you are buying companies just for capital gain, you might have some problems in a bear market. It depends on what sort of companies you own.

On my other blog I wrote yesterday about Canadian National Railway (TSX-CNR, NYSE-CNI) learn more. Tomorrow, I will write about Manitoba Telecom Services Inc. (TSX-MBT, OTC-MOBAF)... learn more.

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 site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Tuesday, February 9, 2016

Update Notes

When I review stock price and dividends each month, I also take the opportunity to look at a bit closer at some of the stocks I cover. These some of the stocks I looked at more closely.

Dividend Changes in my Portfolio

In the last updated of the stocks that I followed, I had 3 stocks I own increased their dividends and two stocks I owned decrease their dividends.

The stock Canadian National Railway (TSX-CNR, NYSE-CNI) increased their dividend to $1.50 from 1.25 which is a 20% increase. This stock is 5.71% of my portfolio. Metro Inc. (TSX-MRU, OTC-MTRAF) increased their dividend to $0.56 from $0.4668 which is also a 20% increase. This stock is 5.84% of my portfolio. Richelieu Hardware Ltd. (TSX-RCH, OTC-RHUHF) increased their dividend from $0.64 from $0.60, which is a 6.7% increase. This stock is 1.59% of my portfolio.

Mullen Group (TSX-MTL, OTC-MLLGF) cut their dividend to $0.96 from $1.20 which is a 20% drop. This stock is 0.42% of my portfolio. TransAlta Corp (TSX-TA, NSYE-TAC) also cut their dividends to $0.16 from $0.72, a 77.8% drop. They had also decreased the dividend in 2014. This stock is 0.28% of my portfolio.

However, the net result to my income is interesting. My total income dropped 0.16%, basically a wash. This is because the big drop in dividends of TransAlta. Prior to the change TransAlta dividend yield was around 14.6%. After the drop in dividends, the dividend yield was just 3.25%.

The other thing to point out is that my total income for 2016 (if there are no further dividend changes) is 0.25% higher than last year. This is because all dividend increases and decreases in dividends after January of the year will cause total income to change in the following year. I have never had a year when my total dividend income did not increase.

Bombardier Inc. (TSX-BBD.B, OTC-BDRBF)

This company is still going down. Demetris Afxentiou of Motley Fool gives a good breakdown of the problems facing this company. He says it is incredibly risky at present and he is probably right.

Some think that the company might do a reserve split. See an article by Allison Lampert of Reuters in the Financial Post. The company has already got funding from the Quebec Government. In this article by Josh Wingrove of Bloomberg News in the Financial Post he talks about the fact that Trudeau may want a change in the control structure of the company has the Bombardier family currently controls it through special shares. Apparently there is a G&M article about China wanting to buy at least some of the company. I do not have a subscription to the G&M and therefore cannot get the article.

Mullen Group (TSX-MTL, OTC:-MLLGF)

The drop in dividends in this stock was not unexpected. It is a company that services and oil and gas industry. There is a note about this in Canadian Business . They are being prudent.

TransAlta Corp (TSX-TA, NYSE-TAC)

Last month I noted that Matt Smith of Motley Fool suggests that they will cut the dividend.

On January 14, 2016 TransAlta Corp said that they are cutting the dividend. This dividend cut is almost 78%. The new dividend on an annualized basis represents a 15% to 20% payout of Comparable Free Cash Flow based on 2016 guidance and will provide TransAlta with incremental cash of approximately $150 million annually.

The dividend cut is disappointing, but it can hardly be a surprise. But some view this as a positive move. An article on Business Wire, said Fitch Ratings views TransAlta Corporation's (TransAlta) dividend reduction as a positive signal of management's commitment to deleveraging as the company faces unfavorable equity market conditions and energy price environment.

I have had this stock a long time. I have made a 5.57% total return on this stock since 1987. I have received a lot of dividends, but I also have a capital loss.

On my other blog I wrote yesterday about Exco Technologies Ltd. (TSX-XTC, OTC-EXCOF)...learn more. Tomorrow, I will write about Canadian National Railway (TSX-CNR, NYSE-CNI)... learn more.

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 site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Thursday, February 4, 2016

Something to Buy February 2016

There is always something to buy in the stock market. On Tuesday, I put out a list of the stocks that I covered and showed what stock might be a good deal based on dividend yield. Now I am trying to categorize what sorts of stocks may be a good deal based on dividend yield.

The advantages to using dividend yield to judge how cheap or expensive a stock is, is that you are not using estimates or old data (like last reported quarter's data). You are using today's stock price and today's dividend yield.

For other testing, like using P/E Ratios and Price/Graham Price Ratios, you use EPS estimates or from the last reported financial quarter. When using P/S Ratios, P/CF Ratios or P/BV Ratios you are using data from the last reported financial quarter.

However, no system is perfect. But if you are interested in buy a stock a list of stocks cheap or reasonable using dividend yield data might be a good place to start.

Categorizing stocks is not as simple as it might seem. Every site you go to has categorized stocks a bit differently. I try to keep this as simple as possible. See my spreadsheet here to see what stocks are showing whether a stock is relatively cheap based on historical high dividend yields (P/Hi), historical average dividend yields (P/Ave), historical median dividend yields (P/Med) or on 5 year median dividend yields (P/5Yr). As in other spreadsheets, you can highlight a line or a number of lines for better viewing.

In the following notes I am only going to list stocks showing as cheap using the historical high dividend yields (P/Hi) and historical median dividend yields (P/Med).

I follow 18 stocks in the consumer discretionary category. Of these stocks, only Dorel Industries (TSX-DII.B) is showing as cheap by the historically high dividend yield. Seven (or 39%) are showing cheap by historical median dividend yield. They are Canadian Tire Corporation (TSX-CTC.A); Dorel Industries (TSX-DII.B), High Liner Foods (TSX-HLF); Leon's Furniture (TSX-LNF); Magna International Inc. (TSX-MG), Reitmans (Canada) Ltd. (TSX-RET.A) and Thomson Reuters Corp (TSX-TRI). Nothing has changed from last month.

I follow 10 Consumer Staples stocks. None are showing as cheap by the historically high dividend yield. Two stocks (or 20%) are showing cheap by historical median dividend yield. These are Jean Coutu Group Inc. (TSX-PJC.A) and Loblaw Companies (TSX-L). This is the same as for last month.

I only follow two Health Care stocks and both are US stocks. They are both cheap by the historical median dividend yield. The stocks are Johnson and Johnson (NYSE-JNJ) and Medtronic Inc. (NYSE-MDT). This is the same as for last month.

I follow 12 Real Estate stocks. Melcor Developments Inc. (TSX-MRD) is showing as cheap by the historically high dividend yield. Five stocks (or 42%) are showing cheap by historical median dividend yield. They are Artis REIT (TSX-AX.UN); FirstService Corp (TSX-FSV), Granite Real Estate (TSX-GRT.UN) H & R Real Estate Inv. Trust (TSX-HR.UN) and Melcor Developments Inc. (TSX-MRD). This is the same as for last month.

I follow 6 Bank stocks. None are showing as cheap by the historically high dividend yield. Five stocks (or .83%) are showing cheap by the historical median dividend yield. These stocks are Bank of Nova Scotia (TSX-BNS); Barclays PLC (NYSE-BCS), National Bank of Canada (TSX-NA); Royal Bank (TSX-RY) and Toronto Dominion Bank (TSX-TD). Barclays PLC (NYSE-BCS) is new to this list this month.

I follow 13 Financial Service stocks. One is showing as cheap by the historically high dividend yield and that is Home Capital Group (TSX-HCG). Nine (or 69%) stocks are showing cheap by the historical median dividend yield. These stocks are AGF Management Ltd (TSX-AGF.B); CI Financial (TSX-CIX); DirectCash Payments Inc. (TSX-DCI); Equitable Group Inc. (TSX-EQB), Gluskin Sheff + Associates Inc. (TSX-GS); Home Capital Group (TSX-HCG); IGM Financial (TSX-IGM); Power Corp (TSX-POW) and TMX Group Ltd. (TSX-X). This is the same as for last month. I recently bought some GS stock.

I follow 5 Insurance stocks. None are showing as cheap by the historically high dividend yield. Four stocks (or 80%) are showing cheap by historical median dividend yield. These stocks are Great-West Lifeco Inc. (TSX-GWO); Manulife Financial Corp (TSX-MFC); Power Financial Corp (TSX-PWF) and Sun Life Financial (TSX-SLF). There is no change from last month. I recently bought some Manulife stock.

I follow 34 Industrial stocks. Because I have so many and Industrial is not very descriptive, I have divided my Industrial stocks into 4 separate categories under Industrial. They are Construction, Industrial, Manufacturing and (Business) Services.

I have 6 Construction stocks. One is cheap by the historically high dividend yield. That stock is SNC-Lavalin (TSX-SNC). Three stocks or 50% are showing as cheap by historical median dividend yield. They are Bird Construction Inc. (TSX-BTD), SNC-Lavalin (TSX-SNC) and Toromont Industries Ltd. (TSX-TIH).

I have 6 stocks I have left with the sub-index of Industrial. One is cheap by the historically high dividend yield. That stock is Finning International Inc. (TSX-FTT). Three stocks or 50% are showing as cheap by historical median dividend yield. They are Finning International Inc. (TSX-FTT), Methanex Corp. (TSX-MX), and Russel Metals (TSX-RUS).

I have 9 Manufacturing stocks. One is cheap by the historically high dividend yield. That stock is Hammond Power Solutions Inc. (TSX-HPS.A). Two stocks or 22% are showing as cheap by historical median dividend yield. They are Ag Growth International (TSX-AFN) and Hammond Power Solutions Inc. (TSX-HPS.A).

I have 15 Services stocks. None are showing as cheap by the historically high dividend yield. Six stocks or 40% are showing as cheap by historical median dividend yield. These stocks are Canadian National Railway (TSX-CNR); HNZ Group Inc. (TSX-HNZ.A); Mullen Group (TSX-MTL); Pason Systems Inc. (TSX-PSI); Pulse Seismic Inc. (TSX-PSD) and Transcontinental Inc. (TSX-TCL.A).

I follow 10 Energy stocks. Five Stocks or (50%) are showing as cheap by the historical high dividend yield. They are Canadian Natural Resources (TSX-CNQ); Encana Corp. (TSX-ECA), Ensign Energy Services (TSX-ESI); Husky Energy (TSX-HSE) and Suncor Energy (TSX-SU). There are six stocks (or 60%) showing cheap by historical median dividend yield. They are the five above and Cenovus Energy Inc. (TSX-CVE). This has not changed from last month.

I follow 2 Material stocks. None are showing as cheap by the historically high dividend yield. One is cheap by historical median dividend yield and that is Teck Resources Ltd. (TSX-TCK.B). This has not changed from last month.

I follow 8 Tech stocks. None are showing as cheap by historical median dividend yield. Four stocks (or 50%) are showing cheap by historical median dividend yield. They are Absolute Software Corporation (TSX-ABT); Calian Technologies Ltd (TSX-CTY), Computer Modelling Group Ltd. (TSX-CMG) and Evertz Technologies (TSX-ET). There is no change from last month.

I follow 8 of the infrastructure type utility companies. None are showing as cheap by historical high dividend yield. Three stocks (or 38%) are showing cheap by historical median dividend yield. They are AltaGas Ltd (TSX-ALA); Enbridge Inc. (TSX- ENB) and Veresen Inc. (TSX-VSN). TransCanada Corp (TSX-TRP) was deleted from this list.

I follow 12 of the power type utility companies. None are showing as cheap by the historically high dividend yield. Only one stock (or 8%) is showing cheap by historical median dividend yield. That stock is ATCO Ltd (TSX-ACO.X).

I follow 5 of the Telecom Service type utility companies. One stock is showing cheap by the historical high dividend yield and that is Shaw Communications Inc. (TSX-SJR.B). Four stocks (or 80%) are showing cheap by historical median dividend yield. These stocks are BCE (TSX-BCE); Shaw Communications Inc. (TSX-SJR.B); Telus Corp. (TSX-T) and WiLan Inc. (TSX-WIN). This has not changed from last month.

On my other blog I wrote yesterday about Shaw Communications Inc. (TSX-SJR, NYSE-SJR)... learn more. Tomorrow, I will write about AGF Management Ltd. (TSX-AGF, OTC-AGFMF)... learn more.

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 site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Tuesday, February 2, 2016

Dividend Stocks February 2016

The theory is that you should use the dividend yield to see if a dividend stock is selling at a stock price that is relatively cheap. A stock price is considered cheap if it is selling at a dividend yield higher than the historical high yield or higher than the historical average yield or historical median yield. See my spreadsheet at dividend growth stocks that I just updated for February 2016. On this list,
  • I have 12 stocks with a dividend yield higher than the historical high dividend yield,
  • I have 49 stocks with a dividend yield higher than the historical average dividend yield
  • I have 67 stocks with a dividend yield higher than the historical median dividend yield and
  • 73 stocks with a dividend yield higher than the 5 year average dividend yield.
When I did my list last month,
  • I have 11 stocks with a dividend yield higher than the historical high dividend yield,
  • I have 52 stocks with a dividend yield higher than the historical average dividend yield
  • I have 69 stocks with a dividend yield higher than the historical median dividend yield and
  • 69 stocks with a dividend yield higher than the 5 year average dividend yield.
When I did my list in January 2014,
  • I had 9 stocks with a dividend yield higher than the historical high dividend yield,
  • I had 45 stocks with a dividend yield higher than the historical average dividend yield and
  • 39 stocks with a dividend yield higher than the 5 year average dividend yield.
In other changes, for Algonquin Power & Utilities Corp (TSX-AQN, OTC-AQUNF); Brookfield Asset Management TSX-BAM.A, NYSE-BAM); Enbridge Income Fund Holdings Inc. (TSX-ENF, OTC-EBGUF) and FirstService Corp. (TSX-FSV, NASDAQ-FSV) I realized I was using stock price in CDN$ and dividends in US$. These companies pay dividends in US$. I have fixed my spreadsheet. For this test to be valid, currencies must be the same. I have shown the dividends on these stocks in purple.

If you had one share of each stock, total dividends last month would be $146.54. This month dividends would be $146.30. Of the stock that I follow 5 stocks has raised their dividends since last month. Dividends raises are denoted in green. Those stocks are shown below.

ATCO Ltd. (ACO.X, OTC-ACLLF)
Canadian National Railway (TSX-CNR, NYSE-CNI)
Canadian Utilities Ltd. (TSX-CU, OTC-CDUAF)
Metro Inc. (TSX-MRU, OTC-MTRAF)
Richelieu Hardware Ltd. (TSX-RCH, OTC-RHUHF)

Of the stocks that I follow 2 companies have decreased their dividends. I have denoted these dividends in red. The stocks are shown below.

Mullen Group (TSX-MTL, OTC-MLLGF)
TransAlta Corp. (TSX-TA, NSYE-TAC)

I am showing whether a stock is relatively cheap based on historical high dividend yields (P/Hi), historical average dividend yields (P/Ave), historical median dividend yields (P/Med) or on 5 year median dividend yields (P/5Yr). See these fields on the right side of the file. You can highlight a particular stock using your cursor to highlight the appropriate line.

There are always some stocks to buy because they are priced reasonably. There are always stocks to currently avoid because they are overpriced. Looking at dividend growth stocks that are selling at stock prices that give them a dividend yield above the historical median dividend yield are probably the best bet.

The stocks that are selling at prices that give them a dividend yield above the historical high yield could be good stocks to buy. However, these stocks may be selling so cheap because of current troubles, especially financial troubles and should be treated with caution. Do not forget that I have all the stocks I follow on this spreadsheet and some are much better investments than others.

You should always investigate a stock before you buy. Sometimes different stocks in certain sectors are just out of favour or the stock market is just in one of its declines. However, a stock may be relatively cheap because it has problems. That is why you should always investigate a stock before buying.

Looking at stock this way is equivalent to a stock filter. A main problem I know of is for the old income trusts. These companies have generally lowered their dividend yields forever and they will probably never get back to the old dividend yield highs they made as an income trust company. For these stocks, you might be better comparing the current dividend yield to the 5 year median dividend yield.

Also, on some stocks I have a lot more information years in my spreadsheets than for other stocks. So, finding a stock on the list as "cheap" is only the first step in finding a stock to buy. This is the same with any other sort of stock filters that you can use.

The last thing to remember is that I have entering figures into a spreadsheet. I could put them in incorrectly, I can transpose figures and I can misread figures. This is another great reason why you should check a stock out before investing. As this is just a filter, it works better on some stocks than on others.

See my entry on my methodology in establishing the historical dividend yield highs and lows for the stocks that I cover. I have an entry on my introduction to Dividend Growth. You might want to look at my original entry on Dividend Growth Stocks. I have also written about why I like Dividend Growth companies.

On my other blog I wrote yesterday about Valener Inc. (TSX-VNR, OTC-VNRCF)... learn more. Tomorrow, I will write about Shaw Communications Inc. (TSX-SJR, NYSE-SJR)... learn more.

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 site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Thursday, January 28, 2016

Banks and Ratios

Banks and Ratios

The reason to look at company ratios is that the stock price for a company tells you very little. The price of a stock certainly does not tell you if the stock is cheap or expensive. For example a stock price of $10 on one stock could be an expensive price, but a stock price of $20 on another stock could be a cheap price. It is like all stocks have their own currency and you will need a common frame of reference in order to tell how cheap or expensive a stock is. My Spreadsheet is here.

The method I like best to check for a good stock price is dividend yield and this against the historical median dividend yield. Of the big banks that I follow, the Bank of Nova Scotia comes off well in this test. Actually all the banks do because their prices have fallen lately.

My next favourite test is using the Graham Price. Of the big banks I follow, the Royal Bank is relatively lower with the current Price/Graham Price Ratio some 25% below its historical median P/GP Ratio.

In this entry I am just looking at mostly just the Canadian Banks that I follow. Of course it is not complete without CIBC and Canadian Western Bank but I really have no motivations to start to follow these banks. I have 3 bank stocks already of BMO, RY and TD. My son owns BNS. I thought it might be fun to look at a small Canadian bank, so I have Nation Bank.

I do not think I would ever buy CIBC (TSX-CM, NYSE-CM) or Canadian Western Bank (TSX-CWB, OTC-CBWBF). I will include similar data for these banks where I can find it. I try to get the right information, but I cannot guarantee anything.

One of the most common ratios to look at is the P/E Ratio. When dealing with P/E Ratios, the lower the P/E ratio the better the relatively price is. Below is the 10 year low, median and high median P/E Ratios for each bank I follow. Basically what this chart tells you is that investors are willing to pay relatively more money for TD Bank shares than for other banks. Last year when I looked at this data, RY was tied with TD Bank.

Bank Symbol Low P/E Median P/E High P/E
Bank of Montreal BMO 10.07 11.34 12.10
Bank of Nova Scotia BNS 10.64 11.63 12.50
Royal Bank RY 10.51 11.44 12.68
National Bank NA 9.04 10.62 11.89
TD Bank TD 11.40 12.63 13.69


So what is the relatively cheapest bank today? Currently National Bank has the lower P/E. In the last column I am comparing the Historical Median P/E with the Current P/E. This shows that National Bank has dropped the most from its median. The National Bank has fallen a lot recently. If you want one of the big 5, BNS has also dropped a lot from its median value.

Bank Symbol Price 2016 EPS Est. Curr P/E M/C
Canadian Western Bank CWB $22.45 $2.65 8.47
CIBC CM $90.27 $9.58 9.42
Bank of Montreal BMO $74.41 $6.99 10.65 -6.13%
Bank of Nova Scotia BNS $56.33 $5.91 9.53 -18.05%
Royal Bank RY $70.74 $6.84 10.34 -9.60%
National Bank NA $38.70 $4.78 8.10 -23.76%
TD Bank TD $52.43 $4.75 11.04 -12.61%


The next most common ratio is the Price/Book Value per Share Ratio. For Price/Book Value per Share Ratio, the lower the P/B Ratio is, the more book value you get for your money. Theoretically, the book value is the difference between assets and liabilities and therefore is the potential value a company is worth or the breakup value of the stock for the shareholders.

When valuing a stock, the lower the P/B Ratio is, the better the stock price is on a relative basis. The 10 year median P/B Ratios for our banks are below. From this it is obvious that historically, investors were willing to pay a relatively higher price for Royal Bank shares than other shares. It could also say that the Bank of Montreal offers the best deal when it comes to Book Value per Share.

Last year, except for National Bank, all the 10 year P/B Ratios for these banks were higher. On a relative basis, investors were still willing to pay a relatively higher price of the Royal Bank shares and Bank of Montreal was still the best deal with it come to Book Value per Share.

Bank Symbol P/B Ratio
Bank of Montreal BMO 1.57
Bank of Nova Scotia BNS 2.07
Royal Bank RY 2.16
National Bank NA 1.79
TD Bank TD 1.67


At present all the banks P/B Ratios are below their 10 year P/B Ratios. CWB's price is below is book value. Of the banks I follow, BMO has the lowest P/B Ratio and the Royal Banks is the lowest relative to its 10 year P/B Ratio as its current P/B Ratio is some 17% lower than the 10 year P/B Ratio.

Bank Symbol Price BVPS Current P/B M/C
Canadian Western Bank CWB $22.45 $23.73 0.95
CIBC CM $90.27 $53.76 1.68
Bank of Montreal BMO $74.41 $56.31 1.32 -15.83%
Bank of Nova Scotia BNS $56.33 $29.30 1.92 -7.14%
Royal Bank RY $70.74 $39.52 1.79 -17.13%
National Bank NA $38.70 $23.54 1.64 -8.17%
TD Bank TD $52.43 $33.79 1.55 -7.08%


For dividend paying stocks, the Dividend Payout Ratios are important. For the DPRs, lower ratios are better ratios. For Banks the DPR for EPS is the most important one. When looking at these ratios, it would appear that Canadian Western Bank has the best ones, that is the lowest ones.

The problem with cash flow is that for banks they tend to be volatile and often negative. Also note that I got the CFPS for CWB and CM from a site. I do not know if the site calculates CFPS like I do. Why I caution is because different sites give different values for CFPS.

Bank Symbol DPR for EPS DPR for CFPS
Canadian Western Bank CWB 36% 32%
CIBC CM 52% 46%
Bank of Montreal BMO 49% 89%
Bank of Nova Scotia BNS 48% 24%
Royal Bank RY 45% 18%
National Bank NA 44% 11%
TD Bank TD 48% 11%


When Shares are issued for Stock Options, you want a company that issues around the same relative number of shares for its industry. Of course, the lower the number of shares issued for stock options, the less money comes out of the earnings for shareholders. In the value column, I am putting in the value of the stock options at the end of the calendar year rather than the book value of these shares.

In 2015 Royal Bank has one of the lowest percentages of their shares issued for stock options purposes. However, it was only the third lowest when it came to the cost of these stock options. It has the same position as last year. Also for 2015 National Bank has the highest percentage of their shares issued for stock purposes. This was the same as for 2014. All the banks issues less shares and a lower percentage of their shares in 2015 compared to 2014.

Bank Symbol Shares % of o/s Shares Value 2014
Bank of Montreal BMO 0.843 0.13% $ 68M
Bank of Nova Scotia BNS 1.828 0.15% $112M
Royal Bank RY 1.190 0.08% $ 89M
National Bank NA 1.060 0.31% $ 46M
TD Bank TD 3.300 0.18% $163M


For the 10 year Price/Graham Price Ratios, the lower the ratio the lower the relative price of the underlying shares. Here again, this chart shows that investors are willing to pay a relatively higher price for Royal Bank stock than for other bank stocks. It also shows that generally the National Bank has a relatively lower stock price.

Bank Symbol Low Median High
Bank of Montreal BMO 0.77 0.90 1.05
Bank of Nova Scotia BNS 0.91 1.02 1.21
Royal Bank RY 0.99 1.17 1.40
National Bank NA 0.80 0.89 1.05
TD Bank TD 0.87 0.99 1.08


So on a relative basis what stock is cheaper? BMO has the lowest P/GP Ratio for the stocks that I follow. The Royal Bank has relatively the lowest P/GP Ratio compared to the 10 year median value being some 23% lower. CWB has the absolute lowest P/GP Ratio.

Bank Symbol Price Graham Price P/GP Ratio M/C
Canadian Western Bank CWB $22.45 $37.19 0.60
CIBC CM $90.27 $103.64 0.87
Bank of Montreal BMO $74.41 $94.10 0.79 -12.14%
Bank of Nova Scotia BNS $56.33 $62.42 0.90 -11.53%
Royal Bank RY $70.74 $77.99 0.91 -22.48%
National Bank NA $38.70 $51.36 0.75 -15.34%
TD Bank TD $52.43 $60.09 0.87 -11.87%


For dividend yields, the higher the dividend yields the better the relative price of a stock is. Here is the 5 year median and historical average and historical median dividend yields based on my spreadsheets for our banks. The BMO seems to be giving the best dividend yields.

Bank Symbol 5 Year Hist. Ave Hist. Med
Bank of Montreal BMO 4.46% 5.60% 4.56%
Bank of Nova Scotia BNS 4.10% 5.20% 3.86%
Royal Bank RY 3.92% 4.97% 3.92%
National Bank NA 4.08% 6.12% 3.89%
TD Bank TD 3.71% 3.52% 3.47%


The best test of whether or not a stock is cheap or expensive is to compare the current dividend yield to the Historical Median Dividend yield. Except for BMO, all the banks I follow have higher dividend yields than the historical median.

The higher the dividends yield the better and in this category, the winner is the National Bank at 5.58%. National Bank is also the one which is the highest compared to the historical median. It is some 43% higher than the historical median dividend yield. Of the big 5 banks, Bank of Nova Scotia is a high yield and is some 29% above its median.

Bank Symbol Price Dividend Yield M/C
Canadian Western Bank CWB $22.45 $0.92 4.10%
CIBC CM $90.27 $4.60 5.10%
Bank of Montreal BMO $74.41 $3.36 4.52% -0.98%
Bank of Nova Scotia BNS $56.33 $2.80 4.97% 28.77%
Royal Bank RY $70.74 $3.16 4.47% 13.96%
National Bank NA $38.70 $2.16 5.58% 43.48%
TD Bank TD $52.43 $2.04 3.89% 12.13%


The problem with the above chart is that I have different years of data for different banks. Here is the 5 year median, historical average and historical median dividend yields going back to 1988 for all banks. From this chart you can see that the TD Bank pays out relatively a lower dividend yield that the other banks. The historical median dividend yield is probably the best measure, and it is clear that the Bank of Montreal pays out the best yield.

Bank Symbol 5 Year Hist. Ave Hist. Med
Bank of Montreal BMO 4.46% 5.33% 4.38%
Bank of Nova Scotia BNS 4.1% 5.20% 3.86%
Royal Bank RY 3.92% 4.43% 3.78%
National Bank NA 4.08% 6.12% 3.89%
TD Bank TD 3.71% 3.27% 3.33%


What bank is now giving the best yield? National Bank still has the highest yield and the highest difference from its median. The BNS also is still showing a high yield compared to its median.

Bank Symbol Price Dividend Yield M/C
Canadian Western Bank CWB $22.45 $0.92 4.10%
CIBC CM $90.27 $4.60 5.10%
Bank of Montreal BMO $74.41 $3.36 4.52% 3.09%
Bank of Nova Scotia BNS $56.33 $2.80 4.97% 28.77%
Royal Bank RY $70.74 $3.16 4.47% 18.18%
National Bank NA $38.70 $2.16 5.58% 43.48%
TD Bank TD $52.43 $2.04 3.89% 16.84%


On my other blog I wrote yesterday about Enghouse Systems Ltd. (TSX-ESL, OTC-EGHSF)... learn more. Tomorrow, I will write about Rogers Sugar Inc. (TSX-RSI, OTC- RSGUF)... learn more.

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 site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Tuesday, January 26, 2016

Rebalancing Portfolios

Every year I read articles about how and why you should rebalance your portfolio like this article from Advice for Investors.

I must confess that I have never rebalanced my portfolio. I do not rebalance re a balance of bonds and stocks, or even stocks within categories. I never had a balance of bonds to stocks. When I started I had more bonds. You could get a Canadian Savings Bond at over 19% so there was easy money in Bonds and GICs.

As I have said, I used to Bonds but I have not had any for quite a few years. I got bonds and GICs where interest rates were really high. I sold my last bond in 2007, which was a 30 year bond with rates of 10%. I might buy bonds in the future when interest rates improve. I will have to wait and see.

In my trading account I have always had more financials and utilities than any other category. I have had a minimal amount of resources. I generally do not look at resource stocks as long term investments. Most of my investments have been short term for resource stocks. I look at stock buying as a way of buying future income.

Since I have to withdraw money each year from my RRSP and RRIF I do have cash and near cash (GICs, Investment Savings Account) to last me 5 years with expected dividends included in my calculations. I built my RRSP account similar to my trading account. With my Locked in RRIF, I received several large amounts to invest, so I invested into stocks that were at good prices at those times.

I do take notice of what I have in my portfolio when I buy new stocks. However, to my mind a cheap or reasonably price stock beats out doing some rebalancing when I was buying stocks. I am doing some buying when I take money from my RRSP or RRIF accounts at the year-end or use my line of credit to buy stocks for my Trading Account.

I am building my TFSA account from scratch and I am not taking into account what I have in other accounts. Mostly what I have in the TFSA account are newer and smaller companies than in other accounts.

I do sell companies occasionally because I have to raise money in my RRSP and RRIF accounts because of withdrawals. But what I have been doing is to sell the stocks with the lowest yields.

On my other blog I wrote yesterday about Transcontinental Inc. (TSX-TCL, OTC-TCLAF)...learn more. Tomorrow, I will write about Enghouse Systems Ltd. (TSX-ESL, OTC-EGHSF)... learn more tomorrow.

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 site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Thursday, January 21, 2016

Stock Purchases

I put more money into my TFSA in January 2016. I am putting the maximum I can into this account. I put in an extra $4500 because the Tories increased the maximum for TSFAs in 2015 to $10,000. The Liberals have now lowered the maximum to $5500 in 2016. Therefore I put in $10,000 recently into this account. Also, when I move money from my RRSP and RIF accounts in December, there is some money to buy more shares in stocks and therefore increase my dividend income from my trading account.

For my TFSA account, I purchased Gluskin Sheff + Associates Inc. (TSX-GS, OTC-GLUSF). I had $11,148 in my TFSA to buy stock. GS is relatively below the median and it gives out special dividends all the time. I also wanted to try out a high yield, low capital gain stock.

I have recently reviewed Metro Inc. I bought Metro in 2004. I have earned 19.92% per year on this stock. Of this 18.17% per year is capital gain and 1.75% per year in dividends. When I bought this stock, I was earning 1.87% in dividend yield. Today, I am earning 7.92% on my original stock price.

However, of the money I earned, 92.6% is in capital gain and 7.4% is in dividends. This means unless I sell stock, I only get some 7.4% of the return to spend.

When I looked at GS in October 2015, the 5 and 10 year total return was 9.84% and 8.36% per year with capital gains at 1.83% and 2.09% per year and with dividends at 8.02% and 6.26% per year. On this stock you would get to keep a lot more of the return in dividends to spend.

Of course the market has gone down since I have made my purchase of GS. GS was at $19.73 when I bought it and I noticed it was $16.55 today. When I last looked at Metro, the stock price was $39.37. Today its price is $39.70. The stock market has been treading down recently. Metro has done better than the TSX and GS has done worse.

For my trading account, I will be purchasing more Manulife Financial Corp. (TSX-MFC, NYSE-MFC) stock. This is a stock I already have in this account. The dividend is decent at just over 3%. The stock is considered cheap using dividend yield testing and the historical median dividend yield. I already own this stock in this account.

I had a bit more money in my Trading Account so I bought another 100 shares of Barrack Gold Corp (TSX-ABX, NYSE-ABX). Resources will not stay down forever.

On my other blog I wrote yesterday about Bank of Nova Scotia (TSX-BNS, NYSE-BNS)...learn more. Tomorrow, I will write about National Bank of Canada (TSX-NA, OTC-NTIOF)... learn more.

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 site for an index to these blog entries and for stocks followed. Follow me on Twitter.