Would you buy bank dividend stocks right now? | General financial discussion | Discussion forum

When banks aren't paying customers squat for bank accounts and GIC's; that's often an indication to take a look at investing in stocks at the other end of the chain.

Since we are almost 70 years of age, banks stocks tend to be a safe boring option for protecting capital, while collecting a reasonably good rate of return for a low risk investment. As one of our lawyers once, observed: If the Canadian banks ever fail, then our stock holdings will probably be the least of our concerns!!

With tech stocks doing so badly these days, our stock market investments are now pretty much a spread of Candian bank stocks!

Just going over my year-end stock market performance for Canadian Bank Stocks.

Bank Stock Holdings Dec 31, 2008 = $139,000

Bank Stock Holdings Dec 31, 2009 = 221,000

Bank Stock Capital Gain for the year = $83,000

Bank Stock Dividends for the year = $7,800

Total gain on an investment of $139,000 = $90,000

The same $$$ in a Peoples Savings Account @ 2.1% would have yielded $2900.00 :frown: Not that we are not topped up the the full CDIC limit +; but there are better options out there.

The way things are going these days, with low interest rates getting even lower, we have been giving serious consideration to dumping another $100,000 -- $200,000 or so into the market. 2% interest rates are starting to become tedious.

Since banks are not paying out anything to their depositors, the only other logical alternative is to reap the benefits of the system as a stock holder; and Canadian banks tend to pay quite well on a consistent basis.

My oldest and largest bank stock holdings are with Royal, which I've held since 1999:

2500 units:

1999 = $ 15,675
2009 = $141,500
gain = $125,825 (900%)

So that's a 90% capital gain per year over 10 years; not to mention attractive dividends, which as I recall was somewhere around 4% even this past year.

Of course the your numbers don't work out! Because you fabricated imaginary numbers instead of using the the numbers I provided. Let's see if you can figure out where you went wrong.

1. I did not say that I had 2500 units of Royal Bank stock in 1999.

2. I said I have 2500 shares now; and I didn't buy any new stock over that time, other than an isolated 100 shares that was rolled back into Royal, purchased from dividend income.

3. The current value of my stock is $56.60 per share.

4. The ACB for these holdings is $6.27 per share, which makes for a 900% capital gain over 10 years.

How do you figure that happened? 😕

Observer said:

ok, so if you have 2500 ry shares now, then you would have had 2500/2/2 = 625 ry shares back in 1999 taking into account the 2:1 stock splits that happened in 2000 and 2006 and assuming that you didn't buy more ry shares between 1999 and 2010 (ignoring dividend reinvestment purchases). you say the value of your ry holdings in 1999 was $15,675, so the average share price you bought-in at would have been $15,675/625 shares = $25.08 per share.

Kudos! Although you intially came across as a mere heckler, you actually DO know something about the stock market; and found the missing millions!

The $15675 figure sort of skews everything out of perspective, since The 100 additional 100 shares were obtained at @ $4753 in 2008, which drags the overall gain figure down to a mere 900%.

If I exclude the recent 100 share purchase which in actual fact cost nothing, and deal only with the initial 600 share purchase, it would look more like this:

1999 ACB 600 @ 18.19 = 10,914

2009 2400 @ 56.40 = 135,360

10 year gain = $124,446

i.e. an 1140% gain on the initial investment.

And the point in all of this: in changing times when we are all venturing into new uncharted territory with a mere 2% interest rate begging for a better option. At one time, my wife and I agreed upon confining our stock market entertainment to the initial $50,000 investment; and have fun playing the system more for entertainment purposes, than for any realistic expectation of significant gain. And if nothing else: win, loose or draw; we have certainly received $50,000 worth of entertainment from the system over the past decade.

But with the current mere 2% interest rates, we are engaged in serious discussions of abandoning our initial agreement to restrict our stock market holdings to the initial $50,000 which has now grown to over $200,000 over the past ten years. There is just no way we could have ever come even close to realizing that kind of gain on any high interest savings account.

I have no idea what you are talking about. Your figures make no sense to me.

I acquired a block of stocks for $10,914. That same block of stock now has a value of $135,360. According to my mathematics, that's a gain of $124,446. What could be simpler than that.

I initially acquired 600 shares @ $18.19 = $10,908
After the split I have 1200 shares @ 9.09 = $10,908
After split #2 I have 2400 shares @ 4.545 = $10,908

No matter how many shares I now have, that block of stock cost $10,908; and that same block of stock is now worth $135,360. And that's a gain of a whole lot more than 66%!!

Oops!! I screwed up big time. Bart's figures are correct.

Although I acquired those stocks in 1999, they were actually purchased long before that and held in a trust. When they were transferred to me in 1999, the ACB was listed at $10,000 which works out to $18 a share. To add to the confusion, the RY 10 year performance chart confirmed that $18 a share would be accurate.

Then I got looking at the stock chart, which showed the stock being $48 a few days before the 2 for 1 split; and also $48 a few days after the split. So something was wrong with my interpretation of the chart. Although the charts show the current value of a stock, as you go back over the years passed 2 stock splits, the have adjusted the older numbers to indicate performance rather than the actual value of a stock 10 years ago. So I went back through my old records, and that on the date the stocks were transferred to me at $18, the same amount as indicated on the stock chart; those RY stocks were actually selling for $61 per share. So . . .

1999: 600 shares @ 61 = $36,600

2009: 2400 shares @ $56 = $134,000

Gain = $97,400 or 270%

It's been a learning experience for me; and I eventually ended up with the right answer.

Yeh, but it's been a good year so far, with my $134,000 now up 7000 to 141,000 at the end of the first quarter. :lol:. An acceptable rate of return + dividends. All of my bank stocks have done well this year.

picassocat said
It's an old thread I know, but the question remains pertinent: «Looking to move some money (...) into some bank dividend stocks, suggestions and opinions most welcome.»

My choice is a leveraged all Canadian bank fund: it presently has a yield of 11.23% and the fund has gained 21.89% in the last 3 months.

It's holdings are:

National Bank of Canada
Canadian Imperial Bank of Commerce
Bank of Montreal
Royal Bank of Canada
Toronto-Dominion Bank (The)
Bank of Nova Scotia (The)
Brompton North American Financials Dividend ETF

The fund (sold as a stock) is:
Brompton Split Banc Corp A (SBC)  

At one time, I did own that fund - Brompton Split Banc - I sold it eventually. If I remember the distributions which you receive are mostly "return of capital" so the "yield" is not really 11.23%. However, the value of the shares will rise if the underlying owned bank shares appreciate.
I personally like Cdn bank shares and depending on the amount you want to invest, I would prefer to choose one or two banks and buy the bank common shares. As an alternative you could buy a good etf like ZEB which is an equal weight bank etf - it pays dividends which you receive (or can have them reinvested in additional shares.) The ZEB shares will also increase if the underlying bank shares appreciate. Since the etf covers 6 banks you are more cushioned if one bank drops in value.