Would you buy bank dividend stocks right now? | Page 4 | General financial discussion | Discussion forum

MG said
In fact, the 5 big banks in Canada did NOT have ANY capital gain in 2020 as a group. So, no, 11% return was NOT achieved for bank shares in 2020. Here are the closing prices on December 31st of the last 2 years:

2019, 2020, % Incr/(Decr)

CM $108.06, $108.72, 0.8%
RY $102.75, $104.59 , 1.8%
BNS $73.35, $68.80, (6.2%)
TD $72.83, $71.92, (1.2%)
BMO $100.64, $96.78, (3.8%)

If you held just one share of each of the 5 banks, you would be down 1.5%. If you happened to hold more of the losers, you would be down even more. Yes, the capital loss is offset somewhat by the dividend but you can see that the return is nowhere near the claimed 11%.

  

I thought it would be fun to see what the current value of bank shares is so I am listing the closing values today January 15-21.

CM $113.67
RY $108.40
BNS $70.21
TD $75.42
BMO $100.63

It will be interesting to review these values again as 2021 marches on - perhaps an approx 11% return INCLUDING THE DIVIDENDS (4%-5% annually) paid quarterly might be achieved for the year. The return will be an interesting comparison to HISA/GIC returns while approximately 1% to 1.90% right now but likely moving lower in 2021. Normally the banks (flush with cash reserves right now) would be raising their dividends at this time, but we know OSFI has not approved such as yet, but it will come.

Its interesting picking a couple of random dates, but without an offset for the simple overall market change, it doesn't indicate that much.

TSE Composite Index;
Dec 31 - 17,428.66
Jan 15 - 17,908.88
Up 2.75% due primarily to US politics and vaccines.

With this climate and banks' US ownerships, I would expect the weighted average gain for those banks would be better than the overall. Yes I agree a spot value for each over 5 years would 'improve' the sampling.

It might be better to evaluate over a longer period of time. Here is a table of bank stocks we have held for a number of years:

Common shares of the Canadian banks have been decent investments. Not sure if they were that hard to beat.

Those non-standard return numbers are not meaningful or comparable to return numbers one commonly sees.

If one applies the same non-standard calculation to the TSX 300 Total Return Index, then, from the start of 2005 to the end of 2020, one gets

 ((63,846.13 / 21,444.89) - 1) / (2020 - 2005 + 1) = 0.124 = 12.4% per year

In contrast, the standard compounded internal rate of return number is

 ^{(2020 - 2005 + 1)}√ 63,846.13 / 21,444.89 - 1 = 0.071 = 7.1% per year

pooreva said
Could you dig out value of these shares as of 2020, 2019, 2018, 7,6 and so we can see which one grows fastest?
That will be interesting...  

pooreva, off the top of my head, in terms of capital appreciation, CM has probably had the greatest run in the past couple years, but it also, aside from BNS, had the most to catch up, having been a bit of a laggard. NA has also done well, as has CWB. RY and TD are also solid continuous YoY performers.

Currently, BNS remains a bit of a perennial dog in terms of Canadian bank stocks.

Cheers,
Doug

Full and Fair Disclosure: I own CM, BNS, TD, CWB, and HSBC (via the UK register). I also own GWO (a life insurance holding company).