price to sales ratio
GREAT-WEST LIFECO INC. $35 (Toronto symbol GWO; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 996.7 million; Market cap: $34.9 billion; Price-to-sales ratio: 0.9; Dividend yield: 3.7%; TSINetwork Rating: Above Average; www.greatwestlifeco.com) is paying an undisclosed sum for the Irish operations of Legal & General Group plc. This business provides investment and tax-planning services to wealthy individuals. It looks like a nice fit with Irish Life, a leading insurance firm Great-West acquired in 2013.
Thanks to Irish Life’s contribution and savings from eliminating duplicate functions, Great-West’s earnings jumped 34.7% in the three months ended December 31, 2014, to $0.66 a share from $0.49 a year earlier. Revenue rose 33.1%, to $10.7 billion from $8.1 billion.
The company has also raised its quarterly dividend by 6.0%, to $0.3260 a share from $0.3075. The new annual rate of $1.30 yields 3.7%.
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Thanks to Irish Life’s contribution and savings from eliminating duplicate functions, Great-West’s earnings jumped 34.7% in the three months ended December 31, 2014, to $0.66 a share from $0.49 a year earlier. Revenue rose 33.1%, to $10.7 billion from $8.1 billion.
The company has also raised its quarterly dividend by 6.0%, to $0.3260 a share from $0.3075. The new annual rate of $1.30 yields 3.7%.
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CANADIAN IMPERIAL BANK OF COMMERCE $93 (Toronto symbol CM; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 397.2 million; Market cap: $36.9 billion; Price-to-sales ratio: 3.0; Dividend yield: 4.6%; TSINetwork Rating: Above Average; www.cibc.com) sold half of its Aeroplan accounts to TD Bank (see page 31) when TD took over the plan at the start of 2014.
The sale cut CIBC’s revenue by 4.7% in the three months ended January 31, 2015, to $3.5 billion from $3.6 billion a year earlier.
Excluding a gain on the Aeroplan sale and other unusual items, earnings improved 0.5%, to $956 million from $951 million. Per-share profits rose 2.2%, to $2.36 from $2.31, on fewer shares outstanding.
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The sale cut CIBC’s revenue by 4.7% in the three months ended January 31, 2015, to $3.5 billion from $3.6 billion a year earlier.
Excluding a gain on the Aeroplan sale and other unusual items, earnings improved 0.5%, to $956 million from $951 million. Per-share profits rose 2.2%, to $2.36 from $2.31, on fewer shares outstanding.
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BANK OF MONTREAL $76 (Toronto symbol BMO; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 647.0 million; Market cap: $49.2 billion; Price-to-sales ratio: 3.0; Dividend yield: 4.2%; TSINetwork Rating: Above Average; www.bmo.com) earned $1.04 billion in its fiscal 2015 first quarter, which ended January 31, 2015. That’s down 3.9% from $1.08 billion a year earlier. Per-share earnings declined 5.0%, to $1.53 from $1.61.
Earnings from Canadian retail banking (47% of the total) rose 3.5% as low interest rates continued to spur loan demand. The U.S. retail banking division (16%) saw its profits rise 3.6% as higher loan volumes offset the additional funds it set aside to cover potential bad loans.
The wealth management division’s earnings (17%) rose 2.2%. Lower earnings from this business’s insurance operations offset the contribution from recently acquired U.K.-based wealth manager F&C Asset Management. However, the trading division’s earnings (20%) fell 19.9%, mainly due to lower trading volumes and underwriting fees.
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Earnings from Canadian retail banking (47% of the total) rose 3.5% as low interest rates continued to spur loan demand. The U.S. retail banking division (16%) saw its profits rise 3.6% as higher loan volumes offset the additional funds it set aside to cover potential bad loans.
The wealth management division’s earnings (17%) rose 2.2%. Lower earnings from this business’s insurance operations offset the contribution from recently acquired U.K.-based wealth manager F&C Asset Management. However, the trading division’s earnings (20%) fell 19.9%, mainly due to lower trading volumes and underwriting fees.
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BANK OF NOVA SCOTIA $63 (Toronto symbol BNS; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.2 billion; Market cap: $75.6 billion; Price-to-sales ratio: 3.4; Dividend yield: 4.3%; TSINetwork Rating: Above Average; www.scotiabank.com) reported that its earnings rose 2.6% in the quarter ended January 31, 2015, to $1.65 billion from $1.61 billion a year earlier. Per-share profits gained 2.3%, to $1.35 from $1.32, on more shares outstanding. Revenue rose 3.9%, to $5.9 billion from $5.6 billion.
Earnings at the Canadian banking division (which supplies 50% of total earnings) fell 1.7%, mainly because the bank sold most of its shares in mutual fund provider CI Financial (Toronto symbol CIX) in 2014. Excluding CI and adjusting for changing tax rates, this division’s earnings rose 6% due to steady loan and deposit growth. Higher stock markets also increased the value of the assets its wealth management business administers.
The international division (25% of total earnings) saw its profits fall 1.9% on higher loanloss provisions in Colombia and negative foreign exchange rates. However, earnings at the securities trading business (25%) rose 4.1% on higher stock and foreign exchange trading volumes.
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Earnings at the Canadian banking division (which supplies 50% of total earnings) fell 1.7%, mainly because the bank sold most of its shares in mutual fund provider CI Financial (Toronto symbol CIX) in 2014. Excluding CI and adjusting for changing tax rates, this division’s earnings rose 6% due to steady loan and deposit growth. Higher stock markets also increased the value of the assets its wealth management business administers.
The international division (25% of total earnings) saw its profits fall 1.9% on higher loanloss provisions in Colombia and negative foreign exchange rates. However, earnings at the securities trading business (25%) rose 4.1% on higher stock and foreign exchange trading volumes.
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ROYAL BANK OF CANADA $76 (Toronto symbol RY; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.4 billion; Market cap: $106.4 billion; Price-to-sales ratio: 3.2; Dividend yield: 4.1%; TSINetwork Rating: Above Average; www.rbc.com) recently said it would buy City National (New York symbol CYN).
This Los Angeles-based bank focuses on wealthy individuals and lending to businesses in the entertainment, technology and health care industries. Royal plans to merge it with its U.S. wealth management operations.
Royal will pay $5.4 billion U.S. (50% in cash and 50% in shares). Assuming City National shareholders and regulators approve, Royal expects to complete the purchase by the end of 2015. It will start contributing to Royal’s earnings in two years.
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This Los Angeles-based bank focuses on wealthy individuals and lending to businesses in the entertainment, technology and health care industries. Royal plans to merge it with its U.S. wealth management operations.
Royal will pay $5.4 billion U.S. (50% in cash and 50% in shares). Assuming City National shareholders and regulators approve, Royal expects to complete the purchase by the end of 2015. It will start contributing to Royal’s earnings in two years.
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TORONTO-DOMINION BANK $54 (Toronto symbol TD; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.8 billion; Market cap: $97.2 billion; Price-to-sales ratio: 3.4; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.td.com) gets 65% of its revenue and earnings from its Canadian retail banking division, which serves 15 million customers through 1,164 branches.
In the U.S., the bank operates 1,301 branches along the east coast from Maine to Florida. This business supplies 25% of its revenue and earnings. The remaining 10% comes from TD’s wholesale banking division, which offers securities trading and investmentbanking services, such as stock underwriting.
TD’s revenue jumped 53.1%, from $19.6 billion in 2010 to $30.0 billion in 2014 (fiscal years end October 31).
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In the U.S., the bank operates 1,301 branches along the east coast from Maine to Florida. This business supplies 25% of its revenue and earnings. The remaining 10% comes from TD’s wholesale banking division, which offers securities trading and investmentbanking services, such as stock underwriting.
TD’s revenue jumped 53.1%, from $19.6 billion in 2010 to $30.0 billion in 2014 (fiscal years end October 31).
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Canada’s big five banks have fallen out of favour in the past few weeks, for two main reasons. First, the Bank of Canada unexpectedly cut its benchmark interest rate. While lower rates should spur loan demand, banks will earn less interest income on these new loans. Moreover, the banks may have to increase the rate they pay to attract depositors, which would squeeze their profit margins. In addition, investors fear that lower oil prices could force oil producers to default on their loans. Layoffs in the sector could also lead to higher credit losses in Alberta....
TD (see page 31) and Bank of Nova Scotia are our top picks among Canada’s big five banks right now, due to their wide international exposure. But we still like the prospects of Royal Bank, Bank of Montreal and CIBC. All three are well positioned to weather any downturn in the Canadian economy. They also trade at attractive multiples to earnings and continue to raise their dividends. ROYAL BANK OF CANADA $76 (Toronto symbol RY; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.4 billion; Market cap: $106.4 billion; Price-to-sales ratio: 3.2; Dividend yield: 4.1%; TSINetwork Rating: Above Average; www.rbc.com) recently said it would buy City National (New York symbol CYN)....
GREAT-WEST LIFECO INC. $35 (Toronto symbol GWO; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 996.7 million; Market cap: $34.9 billion; Price-to-sales ratio: 0.9; Dividend yield: 3.7%; TSINetwork Rating: Above Average; www.greatwestlifeco.com) is paying an undisclosed sum for the Irish operations of Legal & General Group plc. This business provides investment and tax-planning services to wealthy individuals. It looks like a nice fit with Irish Life, a leading insurance firm Great-West acquired in 2013. Thanks to Irish Life’s contribution and savings from eliminating duplicate functions, Great-West’s earnings jumped 34.7% in the three months ended December 31, 2014, to $0.66 a share from $0.49 a year earlier. Revenue rose 33.1%, to $10.7 billion from $8.1 billion. The company has also raised its quarterly dividend by 6.0%, to $0.3260 a share from $0.3075. The new annual rate of $1.30 yields 3.7%....
SNC-LAVALIN GROUP INC. $38 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 152.5 million; Market cap: $5.8 billion; Price-to-sales ratio: 0.7; Dividend yield: 2.6%; TSINetwork Rating: Average; www.snclavalin.com) earned $106.7 million in the fourth quarter of 2014, up 0.6% from $106.1 million a year earlier. Earnings per share were unchanged at $0.70. These figures exclude a gain on the sale of AltaLink, which operates power lines in Alberta. Revenue jumped 32.7%, to $2.8 billion from $2.1 billion, due to the recent acquisition of U.K.-based Kentz, which provides engineering and construction services to the oil and gas industry. The stock has suffered lately, mainly due to formal charges against the company for using bribes to win construction contracts in Libya between 2001 and 2011. These are the same allegations that prompted SNC to replace its senior executives in 2012 and bring in a new program to enforce ethical practices....