Buy National Bank for growth and income

National Bank’s (TSX─NA) net income, earnings per share and total revenues all increased in fiscal 2014. Indeed, for all three of these measures of financial performance, 2014 marked the twelfth consecutive year of growth.

In view of these results, it’s no surprise shareholders were rewarded with another dividend increase during the year, the ninth since 2010. In fiscal 2014, the bank increased the dividend per share 10.6 per cent to $1.88, from $1.70 in fiscal 2013. The current annual dividend is now $2.00 a share. Since 2010, the dividend per share has increased more than 60 per cent.

National Bank is the leading bank in Quebec and the sixth-largest bank in Canada with branches in almost every province. The bank is an integrated provider of financial services to retail, commercial, corporate and institutional clients. It operates in three business segments: personal and commercial, wealth management and financial markets.

For the fiscal year ended Oct. 31, 2014, National Bank made $1.6 billion (excludes unusual items), or $4.48 a share, compared with $1.4 billion, or $4.04 a share, in fiscal 2013.

Net income and revenues for personal and commercial banking increased six and four per cent respectively, driven by higher loan volumes and market share gains.

Organic growth and the contribution from an acquisition completed at the beginning of the fiscal year led to increases of 37 per cent in net income and 16 per cent in revenues for wealth management.

The bank’s financial markets business enjoyed a stellar year, with net income and revenues up 14 and 11 per cent, respectively.

We expect to see earnings per share growth in the mid-single digits in fiscal 2015. The bank expects stronger growth in the Quebec economy, beginning with the steady pace of recovery in the U.S., a key export market, and the weakening of the Canadian dollar. These factors should be positive for business expansion.

That said, the bank’s dependence on Quebec could prove to be negative if there’s an economic setback in that province. Otherwise, it’s outperformed its peers in consumer loan growth for several years now, and that’s an encouraging sign going forward.

The stock’s recent 200-day moving average price is just 10.4 times the $4.67 a share National Bank will likely earn in fiscal 2014. Meanwhile, the current annual dividend rate of $2.00 yields 4.1 per cent. National Bank is a buy for growth and income. 


Money Reporter, MPL Communications Inc.
133 Richmond St. W., Toronto, On, M5H 3M8, 1-800-804-8846

Comments are closed.