Wednesday, August 23, 2017

A Safe Investment in Canada?

        In Canada, we have very limited in terms of good companies to buy.  Unlike the NYSE or Nasdaq, the markets in Canada are mostly mining, energy, and financials.  Canada does not have investments like Coca-Cola, Pepsi, Johnson & Johnson, Clorox, Proctor & Gamble.  Canada has Cott Corporation, listed on the TSX and the NYSE, for beverage companies.  Cott's soda beverages are no where as tasting as a Coke Product or Pepsi product.

       Unless you have been hiding under a rock, the big 5 Canadian banks are known as some of the best banks in the entire world.  These big 5 banks are Royal Bank of Canada (RY),  Bank of Nova Scotia (BNS), Toronto Dominion Bank (TD), Canadian Imperial Bank of Commerce (CM), and Bank of Montreal (BMO).  The Bank Act means no individual can own more than 10% of any bank.

       I currently own shares in all 5 banks as they have been paying out dividends as follows:
  • Royal Bank of Canada (RY) - started in 1870
  • Toronto Dominion Bank (TD) - started in 1857
  • Bank of Nova Scotia (BNS) - started in 1832
  • Bank of Montreal (BMO) - started in 1829
  • Canadian Imperial Bank of Commerce (CM) - started in 1868 
       All 5 of these banks trade on the Toronto Stock Exchange and the New York Stock Exchange. How profitable are these banks?  I often hear people say something along the lines of one of these banks made over $2 billion in profit last quarter.  I usually just shake my head as it is evident these type of people are not investors in these stocks and likely have no stock market investments.

        Prior to the opening bell on August 23,   Royal Bank of Canada announced a dividend increase from  $3.48 to $3.64 annually.  This represents an increase of 4.6%, which is above the rate of inflation.  The big banks have been raising dividends twice a year for the past several years, except TD Bank raises their dividend annually.  On average the banks dividend raises average average over 6% annually.  I currently own 100 shares of RY.TO, so this dividend increase raises my annual dividend income by $16.00.

      Some other stocks that are in a lot of Canadian portfolios are CP Rail, CN Railway, and Enbridge Inc. The dividend yield for CP Rail and CN Railway is usually under 2%.  The railroads are great investments to own for a long time because the barriers of entry are so high.  Transportation by rail is more environmentally friendly than transporting by truck.

Do you own any shares in any of these companies?

Disclosure:  Long BNS.TO, CM.TO, RY.TO, BMO.TO, TD.TO, CNR.TO and ENB.TO

I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.


1 comment:

  1. Congrats on the raise. I dont own royal just national td and bmo. I also own a bunch of enbridge(its probably my favorite stock) id love to add some rails but they are too high at the moment imo.