The stock market in Canada has turned volatile in 2024 after posting a good year in 2023 when it went up by 8.7%. Investors are speculating when the central banks in the U.S. and Canada will lower their interest rates, adding to the market volatility.
As these uncertainties continue, it could be a smart move for you to include some safe dividend-paying stocks in your investment mix to minimize risks. One such fundamentally strong stock to consider right now is National Bank of Canada (TSX:NA), known for its stable business model and offering healthy dividends.
In this article, let’s analyze National Bank of Canada’s financial growth trends and fundamental outlook to find out where its share prices could be five years from now. But first, let’s take a quick look at the key strengths of its business model.
National Bank of Canada’s key strengths
Based on its market capitalization of $34.5 billion, National Bank of Canada is currently the sixth-largest bank in the country. It offers a diversified portfolio of services, including personal and commercial banking, wealth management, insurance, and capital markets services. This diversified service model helps the bank to cope with economic fluctuations with relative stability.
Interestingly, NA stock has risen 65% in the last five years, outperforming the broader market and most other large Canadian bank stocks. By comparison, the TSX Composite benchmark has gone up by 33.5% in these five years.
At the current market price of $101.86 per share, National Bank offers a decent 4.2% annualized dividend yield and distributes its dividend payouts on a quarterly basis.
Analyzing its recent financial growth trends
Analyzing the recent financial growth trends of the National Bank could provide insight into its potential trajectory over the next five years. Despite an increase in the market’s volatility in recent years, the bank has demonstrated resilience, largely due to its diversified service offerings.
For example, its total revenue rose 44% In five years between its fiscal year 2018 and 2023 (ended in October 2023). Similarly, its adjusted annual earnings during these five years jumped 60%. More importantly, National Bank’s net profit margin expanded to 32% in the last fiscal year from 27.7% five years ago.
Even as the macroeconomic environment hasn’t been favourable in the post-pandemic era, National Bank’s strong financial performance has encouraged the management to continue rewarding investors with increasing dividends. As a result, its dividend per share has increased by around 65% in the five years ended in October 2023.
Expectations from National Bank stock in the next five years
While predicting where its share prices will be five years from now is nearly impossible for anyone, the National Bank of Canada’s robust business model, solid financial growth trends, and strategic focus on diversification and digital innovation lay a strong foundation for solid growth in the future. Given the bank continues to successfully navigate the macroeconomic uncertainties and capitalize on growth opportunities, I wouldn’t be surprised if NA stock, after rallying 65% in the last five years, yields even much stronger returns in the next five years. Besides that, its excellent track record of dividend growth could continue to help income investors earn reliable passive income.