It's good to see the interest rates came down in the US as well as here in Canada which is currently favourable for the stock market in September, 2024.
High interest savings accounts will pay lower rates as more cuts by the central banks are announced. Will some investors eventually decide to shift funds into higher dividend paying yield stocks? History has shown this will probably happen with similar scenarios from the past where interest rates climbed and then reduced later.
What comes with an enticing reward in a 5% yielding stock, is the added risk to consider.
With that in mind, the big banks of Canada are on my radar once again for additional buying.
The Bank of Nova Scotia has an ex-dividend date of October, 2nd, 2024 with a $1.06 dividend payment per share. As of today, I'll be paying $11 more per share for the stock since my last buy in July. My dividend and capital gain is a good thing as the Banks rise in price overall for now. Except for the Bank of Montreal, BMO which fell with their latest quarterly report but has gained over the last week with the short term moves.
That recent BNS share increase reminds me of browsing through the meat aisles in the grocery store. They did report inflation is near or at 2%? I'm not seeing it when it comes to groceries, insurance and up to 5% rent increases per year. I guess it's what they call the "new normal".
The 10th of October, 2024 is the ex-dividend date for TD Bank and the stock price has increased recently. News about a new CEO, Raymond Chun taking over in April, 2025 seems to be a positive move with some TD investors while the ongoing US issues plague the current CEO, Bharat Masrani.
Both banks continue to be undervalued when looking at their Graham Numbers at this time but near their 52 week highs while I buy at a dollar-cost-averaging pace.
I also look at the Bank prices before the Bank of Canada hiked the interest rate to a high of 5%. Makes me think they got room to go higher in price over time as interest rates drop. Just my opinion.
For fun, I asked the Microsoft AI Copilot to find the Top Canadian Bank ETFs and a list displayed within a second or two. Many familiar ETFs I've come across in the past.
BMO's Equal Weight Banks Index ETF, ZEB is at the top of the list among others with a reasonable 0.28% MER compared to mutual funds. Decent growth over time and a yield of 5.8% with a start date of 2009.
Where I don't rely on AI, and do my own research, ZEB is at a yearly high in price so yield is currently at 4.21% where the yield fluctuates with price.
However, I prefer to own the Bank stocks for the dividends. Dividend growth and the capital gains when they happen.
They all run into issues from time to time and eventually work them out but worth billions so when they do have short term issues, it's usually a good time to buy at a lower price. So far, Royal Bank and National Bank are the exceptions the last few years.
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