We believe that Canadian investors should hold at least one, if not two, of the big five Canadian banks stocks in their portfolios. Here is our most recent update on two of those banks.
TD BANK (Toronto symbol TD; www.td.com) is Canada’s largest bank, with $1.03 trillion of assets. It also operates more branches in the U.S. than Canada (1,302 vs. 1,165) and owns 40.72% of TD Ameritrade (New York symbol AMTD), a leading online brokerage.
Excluding one-time items, TD’s earnings per share rose 4.6% in its fiscal second quarter ended April 30, 2015, to $1.14 from $1.09 a year earlier. Revenue gained 4.4%, to $7.8 billion from $7.4 billion, as low interest rates continue to spur loan demand.
The bank’s loan-loss provisions fell 4.3%, to $375 million from $392 million, because more U.S. credit card customers are repaying their loans on time.
Meanwhile, TD has agreed to buy department store operator Nordstrom’s (New York symbol JWN) U.S. credit card portfolio. (Nordstrom is a recommendation of Wall Street Stock Forecaster, our newsletter that focuses on U.S. stocks.) These loans total $2.2 billion U.S.
The stock trades at 12.4 times the bank’s forecast fiscal 2015 earnings of $4.42 a share. It yields 3.8%.
Recommendation in Canadian Wealth Advisor: BUY
The secret of a successful conservative portfolio
A solid conservative portfolio is not a one-note portfolio. It gains strength in diversification. It may be anchored by one or more of Canada’s big five banks. It might also contain one of Canada’s most successful retailers, or one of its strongest integrated oil companies. It will have room for the best ETFs and for the leading Canadian REITs.
Pat McKeough recommends the best of these investments in his safety-first advisory Canadian Wealth Advisor. The next issue will be released in two days, Friday, July 10.
Canadian bank stocks: Bank of Nova Scotia’s recently raised dividend yields 4.2%
BANK OF NOVA SCOTIA (Toronto symbol BNS; www.scotiabank.com) is the third-largest of Canada’s five big banks, with $837.2 billion of assets.
In its fiscal 2015 second quarter, which ended April 30, 2015, Bank of Nova Scotia earned $1.74 billion, or $1.42 a share. That’s up 2.5% from $1.70 billion, or $1.39 a share, a year earlier. Revenue rose 3.7%, to $5.9 billion from $5.7 billion.
The bank set aside $448 million to cover potential bad loans in the latest quarter, up 19.5% from $375 million a year earlier. That’s mainly because it’s loaning more funds to consumers in Canada and Latin America.
Meantime, the bank has now completed its $280-million U.S. acquisition of 51% of the credit card operations of Cencosud S.A., Chile’s largest retailer. As a result, it’s now Chile’s third-largest credit card issuer.
Bank of Nova Scotia has also announced a new plan to buy back up to 24 million worth of its shares, or 2% of the total outstanding, before June 1, 2016.
The bank recently raised its quarterly dividend by 3.0%, to $0.68 a share from $0.66. The new annual rate of $2.72 yields 4.1%. The stock trades at 11.7 times this year’s forecast earnings of $5.70 a share.
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