Seeking Alpha
What is your profession? ×
Profile| Send Message|
( followers)

After hitting bottom in Q1 of 2009, the Canadian financial sector has experienced a magnificent revival, returning gorgeous profits to investors. Even the worst outperformer on the list I made–Sun Life Financial (SLF) - returned approximately 136% since that time. The Canadian financial sector’s stalwarts, are ranked #1 by the World Economic Forum in terms of efficiency and safety. This is the perfect environment for investors looking for large amounts of profit with enjoyable dividend yields. Here are the top six Canadian financial companies with excellent indicators, and have low P/E ratios (Data obtained from Finviz/Morningstar and is current as of July 22):

Bank of Montreal (NYSE:BMO): Interest rates are going to increase, according to Bank of Montreal Economics. As of July 22, the Toronto-based company has a market cap of $41.6 billion. It shows an impressive trailing P/E ratio of 12.52, and a forward P/E ratio of 11.15. Analysts expect the company to have a 7.67% annualized EPS growth in the next five years. Profit margin is 23.62%, while it offers a satisfactory dividend yield of 4.40%.

Those who caught the dip in Feb, 2009 made huge profits. $1000 invested in Bank of Montreal during that time would have about $3275 now. Debts and assets are unstable. While SMA200 is 7.45%, SMA50 is 3.88%. Target price is $66.73, which implies a 2.3% upside potential. The company has an O-Metrix score of 5.09 which is slightly better than the average. BMO and RBC suggest outperform for the stock. A pullback will create an opportune entry point. Recent dividend payments of Bank of Montreal per share have been:

Apr 28, 2011

$0.725

Jan 28, 2011

$0.703

Oct 28, 2010

$0.68

Jul 29, 2010

$0.679

The Bank of Nova Scotia (NYSE:BNS): The Bank of Nova Scotia is the winner of the 2011 Celent Model Bank Award. The company has a market cap of $65.17 billion, as of last Friday's close. P/E ratio is 12.4, and forward P/E ratio is 11.8. Estimated annual EPS growth for the next five years is 9.40%. Profit margin in 2010 was 30.21%, while it paid a 3.55% dividend.

Earnings increased by 30.54% this year, and 33.36% this quarter. SMA50 is 1.88%, whereas SMA200 is 5.72%. Target price indicates a 7.4% increase potential. O-Metrix score is 5.1, and the stock returned 201% since Feb, 2009. While debts are unstable, assets keep increasing for the last four quarters. Yields seem all right. Analysts give a 1.70 recommendation for the company (1=Buy, 5=Sell). Recent dividend history has been:

Jun 30, 2011

$0.534

Apr 1, 2011

$0.537

Dec 31, 2010

$0.49

Oct 1, 2010

$0.475

Canadian Imperial Bank of Commerce (NYSE:CM): CM is planning to buy a 41% stake in American Century Investments. As of the July 22 close, the Toronto-based company has a market capitalization of $32.13 billion, a P/E ratio of 12.06, and a forward P/E ratio of 9.67. Analysts estimate a 7.67% annual EPS growth for the next 5 years, which is truly conservative given the past EPS growth. With a profit margin of 21.72%, and a dividend yield of 4.56%, Canadian Imperial Bank is an enjoyable stock for dividend lovers.

Debts have been decreasing for the last three years. CM had an EPS growth of 119.47% this year, while the stock is trading 10.78% lower than its 52-week high. Target price is $89.93, which implies a 14.8% increase potential. Its O-Metrix score is 5.62. The stock has had strong momentum since Feb, 2009. I believe this trend will continue for a considerable time. Here are the recent dividend payments of Canadian Imperial Bank per share:

Jun 24, 2011

$0.893

Mar 24, 2011

$0.887

Dec 27, 2010

$0.858

Sep 24, 2010

$0.841

Royal Bank of Canada (NYSE:RY): The Toronto-based bank just sold five-year notes worth $1.31 billion. As of July 22, Royal Bank of Canada has a $80.67 billion market cap. Its P/E ratio is 14.90, while forward P/E ratio is 10.36. Estimated annualized EPS growth for the next five years is 9.13%. The stock offers a dividend yield of 3.93%, whereas the profit margin is 20.49%.

The stock is trading 11.59% lower than its 52-week high. One thousand dollars invested in RY in Feb, 2009 would have become about $2594 now. Earnings increased by 28.38% this year. Target price is $64.85, which indicates about a 15.4% upside movement potential. The stock's O-Metrix score is 5.17. Royal Bank of Canada is a slow but solid profit-maker and can be regarded as a long-term buy. Here is the recent dividend history of the company:

Jul 22, 2011

$0.572

Apr 21, 2011

$0.514

Jan 24, 2011

$0.502

Oct 22, 2010

$0.491

Sun Life Financial (NYSE:SLF): Sun Life will report its Q2 earnings on Aug, 3. The life insurance company, as of the July 22 close, has a $16.77 billion market cap, a P/E ratio of 10, and a forward P/E ratio of 9.70. Analysts estimate a 9.33% annualized EPS growth for the next five years, while it had a -4.63% EPS growth in the last five. Although profit margin is relatively thin (7.66%), dividend yield is impressive (5.13%).

Debts have been decreasing for the last three years, while assets are increasing. The stock is trading 14.39% lower than its 52-week high, and its target price implies a 17.4% upside potential. P/B is 0.9, while P/S is 0.6. Sunlife’s O-Metrix score of 7.34 is the best on this list. I believe the stock is significantly underpriced, and the current price is an advantageous entry point. Recent dividend payments of Sun Life Financial per share are as follows:

May 23, 2011

$0.372

Feb 28, 2011

$0.367

Nov 22, 2010

$0.353

Aug 23, 2010

$0.343

Toronto-Dominion Bank (NYSE:TD): Toronto-Dominion plans to help first time homebuyers with a tool it has developed. Founded in 1855, the Toronto-based bank has a market capitalization of $75.49 billion, as of the Friday close. It shows a trailing P/E ratio of 14.71, and a forward P/E ratio of 11.52. Analysts estimate annualized EPS growth of 11.50% for the next five years, which is quite reasonable when the company's 13.53% EPS growth over the past five years is considered. Profit margin is 24.12%, while the stock offers a dividend yield of 3.21%.

Toronto has been a true outperformer since Feb, 2009. $1000 invested at that time would have grown to approximately $3193 now. Yields are in a great shape. Although debts are unstable, assets increased by about 50% in the last four years. Toronto- Dominion had a 33.55% EPS growth this year, while it is trading 4.51% lower than its 52-week high. Target price is $92.38, which indicates an 8.6% upside movement potential. SMA50 is 2.70%, while SMA200 is 8.21%. Its O-Metrix score is 5.60. Analysts give a 1.60 recommendation for the company (1=Buy, 5=Sell). The following are the recent dividend payments by Toronto-Dominion:

Jul 1, 2011

$0.683

Apr 1, 2011

$0.681

Jan 4, 2011

$0.614

Oct 1, 2010

$0.591

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.