OPTIMISM #13 - August 31, 2020

Hello clients and friends,

It is the last day of August, now my favourite month starts. 

Weather is still beautiful, but Kelowna is quieter.  Days are warm but nights are cool. 

Red wine tastes better when the air is a bit cooler.  I digress.

Last week, Royal Bank was upgraded from a ‘hold’ to a ‘buy’ by some analyst.

It was a ‘hold’ from 72$ up to 101$ in price, and only now they recommend we should buy?

Earnings per share were $2.23, well ahead of estimates. 

$2.23 for 3 months extrapolates to $8.92 per year.

The dividend is currently $4.32 per year, or 48% or earnings.  Super safe.

My understanding is that banks like to keep dividends between 45% and 55% of earnings.

Also interesting that the Banking Regulator told them to not increase dividends. Interesting. I wonder if they would have?

My take away is that the bank is safe, there is far more than sufficient earnings to pay us our income, and that a dividend increase is likely coming, hopefully this year.  All good.

Canadian bank share prices rose dramatically last week. BMO, the leader, was up nearly 10%.  Again, we are rewarded for patiently owning best of best dividend payers.

A Scotiabank analyst, Hugo Ste-Marie noted that bank stocks are as cheap as they have been in twenty years.

The newspaper article titled “Falling dividend yields point to a potentially bitter winter for income investors.”


What’s funny is no mention of the fact that for dividends to fall, share prices have to rise.

Sounds good to me.

Canada’s former finance minister Mark Carney joined Brookfield, a company heavy in real estate, infrastructure and renewable energy.

These are among the brightest people in business today.

The CEO, Bruce Flatt, earned a ’relatively small’ salary for a CEO of his stature, but personally owns 2.7 billion worth of his company shares.

I bought more last week as well.

Interesting article about getting enough protein in our diets, especially once we are 65+.


Happy (almost) September.  Have a great week.