I love investing in financial industries. The financial industries especially banking industry typically shows attractive price/earning ratio (10~13) compared to other industries (14 ~ above). My main investments are composed of amazing vanguard ETFs such as VTI and VCE and I purchase attractive dividend growing companies whenever I have additional funds to invest.
Canadian banks have been volatile for last 5-6 months due to some bad news related to low oil prices and overvalued housing market which gave me perfect opportunity to jump in. As you may know I purchased Bank of Nova Scotia a while ago then Canadian Western Bank about a month ago. I just purchased CIBC when it faced temporary downturn volatility (Yay~!).
Am I too confident over Canadian banks? Well, the Big 5 banks have been rewarding their shareholders by paying increasing dividend over 100 -150 years (current yields at 4-4.5%) and on top of that for the 7th year in a row, Canadian banks have ranked the world’s healthiest that have the soundest balance sheets (World Economic Forum’s Global Competitiveness Report, 2014-2015).
1 being extremely low (banks may require recapitalization) and 7 being extremely high (banks are generally healthy with sound balance sheets)
Per Department of Finance Canada,
- Canadian economy posted one of the strongest job creation records since July 2009
- Real GDP is significantly above pre-recession levels
- Business tax costs in Canada are lowest in the Group of Seven (G-7) and 46% lower than US (KPMG)
- Ranked at 2nd in one of the most attractive destination for business (Bloomberg, 2013)
Canadian banks are the most dependable banks that people can rely on to protect the deposits and provide stable financing in getting mortgages, education, starting off small businesses, growing larger businesses. As for investor’s perspective, this is truly a couch potato investment that I can sleep soundly at night not worrying about short-term fluctuation and collect my stable dividend income and capital appreciation in a long-term.
As my back ground is South Korean, I was a bit disappointed to see it at 122nd out of 144 countries but that means South Korean banks has lots of room to improve.
It was interesting that
- Japanese and Switzerland banks aren’t one of the top (ranked at 33rd and 21st)
- American banks (where some of Wall Streets’ biggest financial names have collapsed in 2008-2009) at 49th
- British banks at 89th
- German banks at 55th
Where are your home country’s banks at? Are they as sound as Canadian banks? Are Canadian banks deserve spots in your portfolio?
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Ouch, my country’s banks are at 118. I would never invest in them.
When Soviet Union collapsed, and the country has decided to move towards more western-style economy, we went through a bit of a stretch when old system was being destroyed and new system was put into place. That included independent banks popping up like mushrooms here and there. Most of them collapsed within few years because they were run by amateurs or because it was a scam. The economic crisis of 1998 didn’t help either. I’m sure by now the banks there are much more stable but still.
I read about the time when Soviet union collapsed and western cultures hit Russia. Seems like different wind is blowing to Russia lately under Putin. Hope things are going in the right direction and so as the Russian economy. Thanks for stopping by Financial Underdog.
BSR
It’s unsurprising that the UK and the USA are so low down on the list. We play it fast and easy with people’s finances and look where it’s got us – recession/depression/financial crash that people are still suffering from today.
Interestingly, six of the top ten are former British colonies… what does that tell you? That we should go back and do things better 🙂
Cheers
I totally agree with you. UK and USA got burned badly from last crash however I can see them improving but still got much room to grow. You pointed out awesomely well that six of the top ten are former British colonies. They have been conservatively balancing well between regulation and growth. That’s what other countries should do to provide reliable finances to their people. Thanks for stopping by!
BSR
Great list complied here. It’s no secret I’m very fond of the large Canadian banks and articles like this simply reinforce my conviction in these stocks especially at current valuations and prices. The high current yield doesn’t hurt either. Thanks for sharing.
Canadian banks really rocks in terms of their stability and attractive earning and dividend growth and I hope more and more people would take advantage on attractive current valuations. Thanks for stopping by DivHut.
Cheers,
BeSmartRich