Wednesday, June 19, 2013

Bought: National Bank of Canada

With the proceeds of my sale of SNC Lavalin Group (“SNC”) shares last week, I decided to increase my holdings in National Bank of Canada (“NA”) in my TFSA. There were a couple reasons I felt comfortable investing more in NA:
-          The dividend yield (4.7%) coupled with the payout ratio (38%) and history of dividend growth (10% over last year, and 8% average over the last 5 years) are all very appealing to me.
-          Part of my goals for this year was to increase investments in companies where I was comfortable buying more stock at any time. National Bank falls into this category being a systematically important bank in Canada, given its history of impressive results, and based on the dividend numbers above.
-          Compared to its peers, NA trades at a lower P/E (8.7X), thus giving me a larger margin of error.
-          Compared to SNC, NA has a clear business reputation, and the yield is better than double of that provided by SNC.

All in all, I’m very happy with the redeployment of my capital from SNC to NA. I’m hoping NA’s stock stays flat for a while, as I’m looking to exit a position in Dundee REIT to add more shares of NA (or TD) in my TFSA.

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