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 Nation Bank has the best one, which is the lowest one. The DPR payout expect is in the 40 to 55% level for banks. On this basis all the banks are fine this year.
The problem with cash flow is that for banks they tend to be volatile and often negative. A lot of analysts ignore the Cash Flow of banks.
| Bank | Symbol | DPR for EPS | DPR for CFPS |
|---|---|---|---|
| Bank of Montreal | BMO | 36.61% | 27.72% |
| Bank of Nova Scotia | BNS | 46.75% | Neg CF |
| CIBC | CM | 41.92% | 28.90% |
| Royal Bank | RY | 39.06% | 10.09% |
| National Bank | NA | 31.70% | 10.36% |
| TD Bank | TD | 40.93% | 36.39% |
I have started to look at Dividend Payouts compared to Free Cash Flow. The problem I have with checking dividends against Free Cash Flow is that different sites sometimes have different values for FCF. This is a continuing problem.
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 book value of the stock options at the end of the calendar year.
For the 2021 financial year, all the banks issued a higher number of shares, except for NA. All the banks except for NA also had a higher percentage of outstanding shares and except for NA had a higher book value.
| Bank | Symbol | Shares | ‘% of Shares | Value $M |
|---|---|---|---|---|
| Bank of Montreal | BMO | 1.631 | 0.250% | $122 |
| Bank of Nova Scotia | BNS | 3.016 | 0.250% | $200 |
| CIBC | CM | 1.705 | 0.380% | $176 |
| Royal Bank | RY | 1.326 | 0.093% | $165 |
| National Bank | NA | 1.930 | 0.570% | $104 |
| TD Bank | TD | 2.800 | 0.150% | $165 |
For the 2020 financial year, all the banks issued stock options at a lower percentage of outstanding share. The value of the stock options in 2020 was also lower according to their book value. Again, this year, National Bank gave out the highest percentage of their outstanding shares and also the highest in book value.
| Bank | Symbol | Shares | ‘% of Shares | Value $M |
|---|---|---|---|---|
| Bank of Montreal | BMO | 0.564 | 0.090% | $40 |
| Bank of Nova Scotia | BNS | 0.942 | 0.080% | $59 |
| CIBC | CM | 0.824 | 0.180% | $87 |
| Royal Bank | RY | 1.043 | 0.070% | $80 |
| National Bank | NA | 2.318 | 0.690% | $111 |
| TD Bank | TD | 1.500 | 0.080% | $79 |
Since I was looking for performance on a long term basis, I want to include the dividend growth and total return for the 6 banks that I cover.
Below is a chart showing the long term growth of dividends for these banks for the financial year ending in 2021. Here the better growth in dividends is in the 20 to 30 year periods. The TD Bank has the best ones over most periods. The National Bank has the second highest dividend increase over most periods. It was the same last year.
| Bank | Symbol | 5 Yr. | 10 Yr. | 15 Yr. | 20 Yr. | 25 Yr. | 30 Yr. |
|---|---|---|---|---|---|---|---|
| Bank of Montreal | BMO | 4.76% | 4.24% | 4.28% | 6.88% | 7.44% | 7.18% |
| Bank of N. S. | BNS | 4.56% | 5.79% | 6.01% | 9.19% | 10.10% | 9.30% |
| CIBC | CM | 4.22% | 5.22% | 5.12% | 7.25% | 8.01% | 7.54% |
| Royal Bank | RY | 6.60% | 7.46% | 6.90% | 9.51% | 10.57% | 9.71% |
| National Bank | NA | 7.04% | 8.52% | 8.47% | 10.67% | 11.15% | 6.71% |
| TD Bank | TD | 7.91% | 9.25% | 8.81% | 9.19% | 10.68% | 9.82% |
Below is a chart showing the long term growth of dividends for these banks for the financial year ending in 2020. Certainly, in most cases the 15 to 30 years growth is better than the 5 and 10 years growth. The TD Bank has the best ones over most periods. The National Bank has the second highest dividend increase over most periods.
| Bank | Symbol | 5 Yr. | 10 Yr. | 15 Yr. | 20 Yr. | 25 Yr. | 30 Yr. |
|---|---|---|---|---|---|---|---|
| Bank of Montreal | BMO | 5.51% | 4.16% | 5.63% | 7.45% | 7.79% | 7.15% |
| Bank of N. S. | BNS | 5.77% | 6.27% | 6.92% | 10.37% | 10.27% | 9.30% |
| CIBC | CM | 6.39% | 5.28% | 5.36% | 7.82% | 8.60% | 7.53% |
| Royal Bank | RY | 6.19% | 7.58% | 8.01% | 9.61% | 10.77% | 9.42% |
| National Bank | NA | 7.22% | 7.68% | 9.37% | 10.63% | 10.80% | 6.91% |
| TD Bank | TD | 9.23% | 9.81% | 9.57% | 10.03% | 11.18% | 9.77% |
Another way of looking at dividends is to see how many years the bank increased or decreased dividends. My spreadsheet goes back a different number of years for each bank, but it would seem that TD has the best record.
| Banks | Symbol | Yrs | Inc | Dec | Flat |
|---|---|---|---|---|---|
| Bank of Montreal | BMO | 38 | 28 | 0 | 10 |
| Bank of Nova Scotia | BNS | 36 | 33 | 0 | 3 |
| CIBC | CM | 38 | 28 | 0 | 10 |
| Royal Bank | RY | 38 | 29 | 0 | 9 |
| National Bank | NA | 35 | 29 | 1 | 5 |
| TD Bank | TD | 46 | 41 | 0 | 5 |
The other thing I looked at was long term total return. This is calculated from December to December. It will include both capital gains and dividends. It is a compound growth rate per year. Here I am looking for total return of 8% per year or more. All the banks achieved that with the 5 years ending December 2021 except for BNS and this bank came close.
| Bank | Symbol | 5 Yr. | 10 Yr. | 15 Yr. | 20 Yr. | 25 Yr. | 30 Yr. |
|---|---|---|---|---|---|---|---|
| Bank Montreal | BMO | 10.67% | 13.55% | 8.07% | 10.90% | 11.84% | 13.67% |
| Bank of N.S. | BNS | 7.90% | 10.30% | 7.44% | 11.19% | 13.45% | 15.20% |
| CIBC | CM | 10.61% | 11.89% | 6.29% | 9.10% | 10.95% | 12.03% |
| Royal Bank | RY | 11.81% | 14.09% | 9.34% | 12.51% | 14.44% | 14.66% |
| National Bank | NA | 17.13% | 15.49% | 11.06% | 13.93% | 15.62% | 13.55% |
| TD Bank | TD | 11.57% | 13.65% | 10.28% | 11.36% | 14.00% | 14.87% |
This next chart is for the year ending of December 2020. It will include both capital gains and dividends. It is a compound growth rate per year. Here I am looking for total return of 8% per year or more. All the banks achieved that with the 5 years ending December 2020.
| Bank | Symbol | 5 Yr. | 10 Yr. | 15 Yr. | 20 Yr. | 25 Yr. | 30 Yr. |
|---|---|---|---|---|---|---|---|
| Bank of Montreal | BMO | 8.79% | 9.93% | 7.70% | 8.78% | 13.08% | 15.69% |
| Bank of N. S. | BNS | 9.55% | 6.32% | 6.96% | 10.88% | 15.59% | 18.49% |
| CIBC | CM | 8.99% | 8.26% | 6.80% | 9.03% | 12.70% | 12.82% |
| Royal Bank | RY | 11.46% | 11.41% | 9.68% | 11.36% | 16.43% | 14.90% |
| National Bank | NA | 14.68% | 10.83% | 8.97% | 12.62% | 15.49% | 14.91% |
| TD Bank | TD | 10.08% | 10.92% | 9.50% | 9.52% | 15.44% | 14.46% |
The next thing to cover is how well the banks cover their deposits with assets. In this case, the lower the ratio the better. TD has the lowest and best ratio.
| Bank | Symbol | Deposits Cov |
|---|---|---|
| Bank of Montreal | BMO | 0.86 |
| Bank of Nova Scotia | BNS | 0.67 |
| CIBC | CM | 0.83 |
| Royal Bank | RY | 0.73 |
| National Bank | NA | 0.73 |
| TD Bank | TD | 0.69 |
For the financial ending in 2020, TD also had the lowest and best ratio.
| Bank | Symbol | Deposits Cov |
|---|---|---|
| Bank of Montreal | BMO | 0.95 |
| Bank of Nova Scotia | BNS | 0.93 |
| CIBC | CM | 0.82 |
| Royal Bank | RY | 0.72 |
| National Bank | NA | 0.73 |
| TD Bank | TD | 0.71 |
The last thing I want to cover how much an investor would earn if they bought shares with approximately $1,000 on December 31, 1988 and held them to December 31, 2021. On this basis, Royal Bank is the winner with total return of $39,758.48. BNS is the lowest at $18,505.13.
| Symbol | Spent | Shares | Worth | Divs Pd | Total |
|---|---|---|---|---|---|
| BMO | $1,001.00 | 143.00 | $19,475.17 | $9,510.93 | $28,986.10 |
| BNS | $1,001.81 | 274.00 | $12,089.25 | $6,415.88 | $18,505.13 |
| CM | $1,002.78 | 81.00 | $13,373.10 | $7,101.27 | $20,474.37 |
| RY | $1,000.64 | 212.00 | $28,461.00 | $11,297.48 | $39,758.48 |
| NA | $1,000.05 | 174.00 | $16,780.56 | $6,205.71 | $22,986.27 |
| TD | $1,001.25 | 225.00 | $21,820.50 | $8,153.44 | $29,973.94 |
Last year I looked at how much an investor would earn if they bought shares with approximately $1,000 on December 31, 1988 and held them to December 2020. On this basis, Royal Bank is the winner with total return of $32,534.75. BNS is a close second at $31,339.68.
| Symbol | Spent | Shares | Worth | Divs Pd | Total |
|---|---|---|---|---|---|
| BMO | $1,000.02 | 142.86 | $13,825.99 | $8,895.89 | $22,721.88 |
| BNS | $998.98 | 273.50 | $18,816.80 | $12,522.88 | $31,339.68 |
| CM | $1,000.06 | 80.78 | $9,182.26 | $6,610.23 | $15,792.49 |
| RY | $1,000.03 | 211.87 | $22,159.48 | $10,375.27 | $32,534.75 |
| NA | $1,000.04 | 173.92 | $12,459.63 | $5,708.92 | $18,168.55 |
| TD | $1,000.00 | 224.72 | $16,161.86 | $7,433.18 | $23,595.04 |
On my other blog I wrote yesterday about Atrium Mortgage Investment Corp (TSX-AI, OTC-AMIVF) ... learn more. Next, I will write about TFI International Inc (TSX-TFII, OTC-TFIFF) ... learn more on Friday, March 4, 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.
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