National Bank of Canada is the pick of the litter

Jun 1st, 2011 – Comment

What I like about the advance is that stock has been hugging the 50 day moving average taking a steady rise to the penthouse of profit.

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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.

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Question for you Lou.

I am considering buying some Canadian bank stock. I am interested in the dividend income and, hopefully, reasonable steady growth. Is this the route to go and if so, which banks in particular interest you.

Thank you.

Hi Bill,

Thanks for the assignment. Investing in the Canadian banking sector has historically been the basis of wealth generation and there is nothing on the radar that would suggest otherwise. After looking at the charts for the major banks the one that stood out was the National Bank of Canada ( NA TSX).

Lets examine the charts and see where we have come from and where we might be going.

The three year chart illustrates the uptrend that started in September of 2010 which has taken the stock from $55.00 to the May 31, 2011 close of $80.95. What I like about the advance is that stock has been hugging the 50 day moving average taking a steady rise to the penthouse of profit.

In researching the sector  I found that NA has produced industry leading annual average dividend growth of 11% over the last ten years. Their dividend payout ration was the lowest in the sector as well. The analysis was conducted by Rob Carrick for the Globe and Mail, in an article published on March 11, 2011.

The six month chart isn’t indicating that the uptrend is at risk. Now that doesn’t mean that the shares have gone straight up. There have been pull backs that tested support on the trend line but buyers were willing to step up and buy on the dips.

NA has beaten the street in seven of the last eight quarters on an earnings basis. The next report is scheduled for release on August 25,2011 and the forecast is for earnings of $1.74 per share.

Another factor that I like about NA is that they are focused on growing their business in Canada. Some of their competitors have hit rough patches trying to grow in the United States which is great when it works but not so when it doesn’t. The dividend yield on the stock is 3.5%.

The sector is solid and this one looks like the pick of the litter.


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