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We Are Salivating As This Sector Is “On Sale” During Current Market Volatility

Highlights

This is our first post outlining our investment strategy for the Canadian Financial Sector.

 

Canadian Bank Stocks with national and international exposure tend to:

  • Have good yields that increase on a regular basis
  • Provide an opportunity for capital growth

Where appropriate for clients’ risk tolerance and objectives, we buy Canadian Banks with national and international exposure when “on sale”.

Research & Analysis

1) Canadian Bank Yields

 

Since every client has different objectives and needs, we provide an example of an unnamed bank for our analysis.  Canadian banks typically have a good record of dividend and price gains.  Though some provide better opportunities than others depending on the circumstance. We are more than happy to discuss if this investment strategy meets your individual needs.

 

The chart below provides insight into dividend yield and price history of a major Canadian bank over the last 10 years. Notice how the mean dividend yield is approximately 3.7% and is fairly consistent.  Yields above that long-term average provide an excellent opportunity to buy.  

 

Source: dividends.com

Current Strategy

Medium-term Investment Strategy

  • BUY Canadian banks with low exposure to Alberta (and other commodity dependent economies) and higher exposure to retail banking in Canada and in the US when “on sale” (yields are above long-term averages).

Triggers for Strategy Change

  • Changes to the Canadian banking system (not expected)
  • Exposure to commodity based economies changes materially
  • Exposure to retail banking changes materially
  • Exposure to U.S. changes materially

Categories

Type: Investment Strategy Thesis

Geography: Canada

Sector: Financial

Sub-sector: Banking

Area(s) of Analysis: Canadian Bank Dividends

 

 

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson GMP Limited or its affiliates. Assumptions, opinions and estimates constitute the author's judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results. The comments contained herein are general in nature and are not intended to be, nor should be construed to be, legal or tax advice to any particular individual. Accordingly, individuals should consult their own legal or tax advisors for advice with respect to the tax consequences to them, having regard to their own particular circumstances. Richardson GMP Limited is a member of Canadian Investor Protection Fund. Richardson is a trade-mark of James Richardson & Sons, Limited. GMP is a registered trade-mark of GMP Securities L.P. Both used under license by Richardson GMP Limited.