So today I had a bit over $3,000 to play with and I decided to buy a bank. I had enough money to buy 64 shares of LB.TO for $47.37 per share. Why Laurentian Bank and not TD, RY or BNS? Well, my decision was purely based on valuations. The Laurentian Bank is the cheapest dividend paying stock compared to other banks. Laurentian is currently trading at P/E ratio of 8.4x and 10% discount to its book value. The current dividend yield is 5.41% and the payout ratio is 44%. How sweet is that?
Here’s the valuation of other Canadian Banks:
| Banks | P/E Ratio | P/B Ratio | Dividend Yield % |
| Royal Bank (RY.TO) | 13.2 | 2.1 | 3.69 |
| TD Bank (TD.TO) | 13.7 | 2.0 | 3.45 |
| Bank of Nova Scotia (BNS.TO) | 11.2 | 1.6 | 4.26 |
| Bank of Montreal (BMO.TO) | 13.3 | 1.7 | 3.69 |
| Laurentian Bank (LB.TO) | 8.4 | 0.9 | 5.41 |
Here’s the chart for the last three years. It’s certainly lagging behind, compared to other banks, but I feel like the stock price is turning around. At some point, it will have to catch up with other banks. Based on its 5 years average, the stock has at least 20% upside potential.
Your thoughts and critics are welcome. Do you hold Laurentian? Would you buy it here?
LB is a $1B market cap company and RY is $146B. It's just a lot smaller that's all. I like the chart and think this stock has a lot of room to run based on that. Good luck!
ReplyDeleteThanks! Yes, LB is the smallest Bank, but at the end of the day, it's a Bank with loans and mortgages just like other banks. And the yield is good.
Deletenice man. Your first bank! congrats. seems undervalued and nice yield. why didnt you add cibc or national bank in your comparisons?
ReplyDeleteagain nice buy, keep it up
Thanks Rob! Yes, my first Bank in my personal account, but I also bought TD and BNS in my wife's TFSA. I didn't want to compare Laurentian to all the Banks, just the popular ones. Saved me some time typing!
DeleteBy the way, when I click on your profile, it goes to your old blog url. You should edit blogger profile to reflect a new website there. It would be nice for my readers to see your blog too.
Take care!
wow thanks man!
DeleteWonder if thats why sometimes these feeds dont see my new posts. definately will check it out thanks man
No problem!
DeleteHi - greetings from a follower from Denmark. I made a purchase of Medical Facilities after reading your blog. I have had a good run and great dividend along the way - thanks! But now the stock price is up, and I am considering selling, and then keeping the company on my radar for a re-purchase if the price goes down. What are your thoughts on Medical Facilities and the current stock price??
ReplyDelete/Mikael
Hi Mikael,
DeleteThank you for checking in. It’s nice to meet you. I remember picking up the stock last year for under $13. That was a sweet deal and it paid 7.5% yield. I think Medical Facilities Corp has more room to grow. Personally, I plan to hold it until $20 and then trim my position. But my view of the company might change too and I might hold them for longer. They reported their Q2 with revenues up by 10% and surgical cases up by 39% and dividend payout ratio sits at 74%. I don’t expect any dividend increases going forward, but the stock could appreciate another 20% from here. But, that’s my personal opinion.
About your holding, if you bought DR under $13 then you’re sitting on 20% capital gain. You can sell it if you want to book profit and watch the stock for a better entry point. The stock might pullback, but after a good Q2 earnings report, it may continue to go higher. All depends if buyers continue to support the price. Let me know what you decide to do.
Thansk for your reply - I acutally agree. My initial strategy was to keep the stock and harvest dividends for the next ten to fifteen years, so I should just stick to that. If it hits 20 $ maybe we can talk again.
DeleteI love to follow your journey! Keep up the good work!
Sounds like a plan! Do you have a blog?
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