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).
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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