While many of the banks offer similar products from the perspective of the consumers, their non banking line of products and international exposure is what differentiate each bank. Most people are familiar with the fee for a chequing account or the mortgage interest rates but that’s only one segment in the banking business.
In general, I am happy to own any of the banks outlined below in terms of businesses but in practice, they each have their own entry point to maximize the performance of the stocks and your return. When the time comes to buy a bank blue chip stock, I need to evaluate the best buy at that point in time.
Canadian Bank Stock Opportunities
The list of bank stocks below represents many of the biggest companies in Canada with a large exposure internationally. The companies are listed in order of market capitalization.
I look at a few points when it’s time to purchase. As I said, their businesses don’t change much and it’s very controlled so you won’t see them steering in a different direction very quickly.
- P/E highlights a relative price compared to each other and historical
- Dividend growth is a key over the past 10 years
- Current dividend yield
That approach is really just to assess which bank to purchase next once I have identified I want to add more financial to my sector allocation. The purchasing of a stock has also passed all of the following criteria:
- Dividend-paying companies only
- Only businesses I can understand
- Medium to Large Cap. stocks (Except for REITs)
- International diversification is done through conglomerates between Canada and the US
- Sector allocation maintained
- Around 30 stocks overall
My approach is not to find the best value stock as I am not good at doing that. Jim Cramer doesn’t even have a stellar record just to show how hard it is. My approach is to be invested and to take advantage of opportunities when they arise by using a simpler process based on dividend growth and business stability.
Best Canadian Bank NOW
By the numbers, you have the following below. There are 2 types of banks you can look into, the top 6 well-established conglomerates and the smaller players with a potential for more explosive growth. All of the financial institutions below are considered banks as per their industry category in the financial sector.
If you want to invest in US currency, the top 5 banks trade on the New York Stock Exchange (NYSE).
|Ticker||Company||Quote||Score||Market Cap||P/E||Annual Yield||10 Year CAGR Dividend Growth||10 Year CAGR EPS Growth|
|BMO||Bank of Montreal||$77.97||76.34%||50.23||$12.38||4.10%||6.84%||3.62%|
|CWB||Canadian Western Bank||$29.47||89.28%||2.37||$11.00||2.85%||17.65%||12.71%|
|HCG||Home Capital Group Inc||$43.84||86.57%||3.08||$9.85||2.01%||27.85%||21.02%|
How do you assess which is the best bank to invest in now? The top 5 banks tend to have similar trends in general just by looking at this historical graph. There is definitely a winner when you look back at the start date but just imagine you bought in late 2012, they all tend to move up.
My process is to choose based on the current dividend yield, the 10-year dividend growth and the highest 10 EPS growth, the higher it is, the more out of favor the stock is considering the major banks have similar payout ratios. Fees are increased regularly and I would be curious to see how much of it covers the dividend increases :)
Based on the factors I have highlighted, RY and TD would be my top picks. This is really a snapshot in time and something to be aware of as next quarter, a different bank may be a better purchase due to the stock movement and possible dividend increases. That’s why it’s REALLY important you should manage a stock list.
Disclaimer: At the time of writing, I own RY, TD, CM, BNS, NA, BMO in different amount with an eye to consolidated towards a few banks.
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