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Bank Shares and my outlook
I have been watching with interest the sub prime situation in the U.S.A. It has been a drag on bank stocks here in Canada as well. At this point I am just putting cash in my savings account waiting for a buying opportunity. Canadian stocks get punished very badly if they cut their dividend and banks would be no different. Should any bank cut it's dividend the share price would lose 20-30 percent overnight.
This is the entry point that I am looking at as right now most bank dividends are between 5 and 6 percent. Higher that bond yields, and with the dividend tax credit in Canada you would need an interest rate above 10 percent to get the same amount in your pocket.
No stocks are been recommended but I have my favorites in sight. These are only good bets for Canadians because of the dividend tax credit. Canadian banks are well funded and have good deposit base. This will make them very valuable in the future. The dividends will most likely not be cut but it may be a few years before they start to increase. |
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This intel was contributed by norsask
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May, 2012
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