Banking in December, 2023

 

It's feeling more like winter now on the Atlantic coastline. Makes me think about the t-shirt and shorts weather down south although after the high humid summer here, I welcome the cold and fresh air. Winters here overall have become more milder and shorter than years ago.

Owning the Big Banks of Canada, I was interested to see their quarterly earnings come out last week and they were kind of what I was expecting as they raked in their billions once again with dividend increases announced.

They continue to be undervalued in this current interest rate scene with inflation a factor. They are setting aside big money for loan defaults where an expected 80% of mortgages are due for renewal at a higher interest rate in the next year or two than previously signed for. Some figure those people will adjust to keep their homes in this housing shortage fiasco Canada is in. 

The Bank of Canada with eyes and ears everywhere knows this and there are recent articles about BoC lowering interest rates a tad next year to avoid the possible financial crisis which some home owners may face. That would be a good thing, if it happens.

December and it's another Telecom ex-dividend month with Telus (T) and Bell Canada (BCE) dates coming in the first half of this month. Telus with a 3.4% dividend increase for 2024.

With the Pipelines, Pembina Pipelines (PPL) has a current dividend yield of 5.85% and is an interest of mine where I hold the stock. Pipelines are more in the news these days it seems after Enbridge (ENB) announced a 3.1% dividend hike going forward and an upbeat forecast for 2024.

I rank the sectors in order of what I'm most interested in with Banks, Pipelines, Telecoms along with Utilities being top ranked. We all need the services these sectors provide. 

Bitcoin (BTC) is once again flirting with $40,000 USD these days as the once "wild west" crypto world is being tamed by regulations around the world with the US SEC making the most noise lately while Coinbase and Kraken owners and their lawyers prepare their cases against the SEC.

The consensus is ... as Bitcoin becomes more regulated. more whale type institutions will get involved over time but it's either "rat poison" to some or the they like of it being volatile with the hopes of gains when the coin falls back to a low price with it's cycles over the years.

Lately, it seems the boost in BTC's price is due to a possible Blackrock BTC spot price ETF being approved by the US SEC, which has kept all past requests by various outfits on the backburner to date ... and the "Halving" event of BTC in the spring of 2024.

It's "double your money" if a person bought BTC at the beginning of 2023 when it was around $17,000 USD in the risky and volatile world of Crypto, which many like with billions changing hands daily.

 

Fair Value and the Graham Number

It's probably too early for all the predictions I've been reading about Bank of Canada's holding interest rates as is and they have peaked. Expected to slowly come down in 2024. That and the US interest rate holding for now as well has put a spark into the Markets with an upswing lately. 

I've been paying more attention to a stock's "Fair Value" and the "Graham Number". I find it makes sense to buy when a stock is undervalued with growth potential than overvalued where it's price "could" drop after buying while investor sentiment has boosted the price beyond what a company is "worth". 

One can Google the Graham Number and I'll probably add more info on that with the stocks I hold or plan to that are in my Watchlist. However, I call it an investing measuring stick when researching a stock or stay updated on it's value while other investors use different metrics or guidelines.

That approach is probably called defensive investing while attempting to minimise risk, with risk always being a part of investing. 

When a stock is overvalued, it may have future potential and post company forecasts in the news about their plans but things can go south in a hurry at times. Different than Tech stocks like Apple and Microsoft, where those two companies always have something new to build on like AI for example while leading the way in the S&P 500 these days.

Below are some of the Canadian stocks that have performed well in the last year and their dividends, which I snipped from the Globe and Mail about a week ago, Today being the 19th of November, 2023.

I own shares in all but CNQ-T which has become very popular lately, hiking it's dividend by 11%. It's the more expensive stock in the list but it's financial data is decent. The boring but defensive investor stocks some call them which I have onboard for the long haul. 

• Canadian Natural Resources Ltd. (
  CNQ-T +1.48%increase
  ): Dividend yield of 4.4 per cent, five-year dividend growth of 23 per cent and a one-year return to early November of 7.6 per cent.
• Manulife Financial Corp. (
  MFC-T +0.47%increase
  ): A 5.75-per-cent dividend yield, five-year dividend growth of close to 10 per cent and a one-year return of 12.3 per cent.
• Sun Life Financial Inc. (
  SLF-T +0.35%increase
  ): A 4.6-per-cent dividend yield, five-year dividend growth of 9.6 per cent and a one-year return of 8.6 per cent.
• Power Corp. of Canada (
  POW-T +0.41%increase
  ): A 6-per-cent dividend yield, five-year dividend growth of 7 per cent and a one-year return of 4.4 per cent.
• Fortis Inc. (FTS-T): A 4.2-per-cent dividend yield, five-year dividend growth of close to 6 per cent and a one-year return of  7.2 per cent.