Do you want to find opportunities to invest in Canadian dividend-paying companies with the potential for upside capital appreciation? Shares of Canadian Western Bank (TSX:CWB) should definitely be on the radar. Currently yielding in excess of 3% and trading at a price-to-earnings multiple (P/E) under 14 times, this bank may be the best opportunity for investors that are considering the competitors.
As many investors are aware, a goal for investing in a stock is to purchase something which is in fact worth more than what you are paying. What are you giving (paying) and what are you getting?
In comparison to the Big Five banks, Canadian Western Bank’s dividend yield is a little lighter, but the potential for capital appreciation and expansion is far better for this regional player instead of the majors. The Big Five banks are already present across the country.
Over the past few years, the dividends paid to investors have increased consistently from $0.70 in fiscal 2013, $0.78 in fiscal 2014, $0.86 in fiscal 2015, to $0.92 in fiscal 2016. The quarterly dividend sat at $0.23 per share through the first three quarters of 2016. From fiscal 2013 to fiscal 2016, the compounded annual growth rate of the dividend is 9.53%.
Investors receiving a pay raise which compounds at a rate of 9.53% should be very happy. The continued growth of the dividend may, however, have to take a year off. The dividend-payout ratio over the past four years has steadily increased from 30% in 2013 to 31% in 2014, 33% in 2015, and 42% in 2016.
It is perfectly acceptable to give the management a little leeway in 2016 as Alberta, which was already having a difficult time, saw a major city go up in smoke — quite literally.
Alberta is heavily focused on the oil sector, so when the price per barrel of oil began to decline, the fortunes of Albertans started to fold along with it. Many clients who otherwise dealt with Canadian Western Bank have left the province or made the choice to hold off on borrowing money or investing their savings with the bank.
And the fire destroying Fort McMurray did nothing to help — in the short term. Over the long term, economic growth may benefit significantly from this.
The construction or rebuilding of an entire town is going to be a huge economic driver for the province. Not only will there be an increase in demand in construction materials, but the hard-working labour of Alberta is going to be returning to work, this time in the construction industry. The trucking industry will pick up in tandem, followed by the mechanics who fix the trucks and heavy machinery. There could be an extensive ripple effect for the rest of the economy.
Although shares of Canadian Western Bank are not the most popular right now, the total returns offered to investors throughout the year may top even the biggest competitors.
