As another new month approaches I am reminded to, once again, look at my portfolio holdings and decide where to deploy my fresh capital for the month. Looking back at the month of January, I have seen additional declines in the large Canadian bank stocks. No doubt, this was in direct correlation to the continued weakness in oil prices and the seemingly linked nature of the Canadian oil sand companies and Canadian banking stocks. It seems that none of the large Canadian banks were spared as declines in The Toronto-Dominion Bank (TD), The Bank of Nova Scotia (BNS), Royal Bank of Canada (RY), Bank of Montreal (BMO) and Canadian Imperial Bank of Commerce (CM) were rampant. Of course, as a long term dividend growth investor, I simply see this continued weakness as further opportunity for my fresh capital to provide above average current yield while continuing to participate in continued growth among the dividend distributions. Being able to average down on some of my current holdings doesn’t hurt either.
In previous similar articles I often presented a relatively long laundry list of potential names to invest in the upcoming month. However, going into February I feel fairly confident in having a pretty narrow list of names I’d like to invest in. With the current downward trend the large Canadian banks are currently experiencing I am looking to add, in order of preference, to my current holdings of RY, BNS and TD.
Royal Bank of Canada (RY), with a current yield of 4.18% made headlines recently with the announced acquisition of Los Angeles, CA based City National Corporation (CYN). No doubt, RY, with an almost exclusive presence in Canada was eager to expand its U.S. footprint and saw CYN as a perfect fit. RY, with a current PE of 12.50 and a forward PE of just 10.80 seems well valued at current prices.
My other consideration is to continue to average down on my Bank of Nova Scotia (BNS) holding as continued weakness in the stock price has resulted in a very attractive 4.32% yield. BNS, like RY also seems well valued at current levels with a current PE of 11.27 and a forward PE of 10.30.
Finally, I’m considering The Toronto-Dominion Bank (TD) with a current yield of 4.01% and a current PE of 12.68 that is slightly lower than its five year average. Like the two banks mentioned before TD seems well valued at current price levels.
Of course, I always mention that Mr. Market may thwart even the best laid plans and may present an investment opportunity that I am not currently considering. Such is the fickle nature of the market. Sometimes you never really know where the next great investment opportunity will come from. After all, no one could have predicted the dramatic collapse in the oil market going back to the summer of 2014.
What do you think about my February stock considerations? Are any of the names mentioned on your watch list or portfolio? Please let me know below.
Disclosure: Long TD, BNS, RY