Interest Rates and The Rise of The Banks

 

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.

September, 2024 with Telecoms, Energy and Pipelines

 

September 2024 has had a shaky start driving the indexes like the TSX and S&P 500 down and there were warning news about that in late August, with the traditional September Market occurrence when there's a lot of selling and adjusting portfolios for some investors while indexes fall on both side of the border. Something like the "Sell in May and go away" cliche. 

With younger generations entering the Markets everyday while some are also into the Crypto scene, I was thinking those Market quirks would eventually fade away into history ... but not yet. I'm a long term holder investor so don't follow those times of the year when there's more selling than buying. 

With me, it's a good time to go shopping for stock deals but with interest rates falling as well, there's not a lot of movement with the stocks I watch compared to the short term market crashes we've been having lately. Many are low volatility I own

September is also my usual Telecom "buy" month with BCE and Telus,T having quarterly ex-dividend dates. After doing a lot of reading from different sources, I decided to skip this month and just hold the shares I have until I see better news. 

I see the telecom sector with a negative tint these past weeks due to various factors involved although the telecom sector was down around 20% earlier in the year and now a little over 3% down currently. Improvement but I would like to see more "overall green' there and with the Bank of Canada lowering interest rates, that could be a plus over time.

Quebecor with it's expansion out of Quebec however is of further interest to me and I own the stock.

Moving on to the energy and pipeline sectors, Canadian Natural Resources, CNQ and Pembina Pipeline, PPL with a 5% yield is on my list to further buy with ex-dividend dates falling on September 12th and 16th respectively. Pembina Pipeline seems to be the favourite to buy into the Trans Mountain Pipeline in BC when it comes up for sale from the Feds and is currently in high production and shipping to various ports internationally.

The 5 top banks in Canada come into focus towards the end of September plus other stocks such as TC Energy, TRP and I will post about that while CIBC, CM and the Bank of Nova Scotia, BNS will be further buys scheduled.

National Bank, NA in the news a lot lately with Canadian Western Bank's (CWB) board approval for the pending takeover by National Bank. I don't hold the stock currently, only in ETFs. National Bank has a yield of 3.55% currently with the last dividend increase being 3.77% for June, 2024. It would make for a good addition to the portfolio and I'll decide on that in the next couple of weeks.

I add the month and year dates here and in titles for my posts where I like to go back to my previous articles to see what has changed from then to current day with the stocks while companies continue to grow, develop assets and expand to hopefully make more money in the future and pay down debt along the way.

I read about stocks and ETFs from various sources and blogs, making note of those that interest me and do the research while thinking about holding 5 years, 10 years ahead or longer with an addition. There are those that will disappoint and to be expected while even the masters like Warren Buffet will sell at a loss from time to time.