Recent buys – RY & NA

The stock market remained very volatile since our last round of purchases where we purchased over $12,000 worth of dividend stocks. Since we’re still building our dividend portfolio, we are constantly looking for opportunities to add more dividend stocks to increase our dividend income. A downturn market provides an excellent opportunity to buy stocks at a discount.

Buying a stock when the price is falling is not an easy task. Nobody wants to buy something that continues to fall in price. How do you know if the price won’t fall another 10 or 20%? How do you know that the price is at the bottom? How do you know that the company won’t freeze or cut its dividend payments? How do you know that the company won’t go bankrupt? You can evaluate the company, analyze the numbers, and determine whether it makes sense to invest or not. Unfortunately you can’t be 100% sure. Investing is an art and sometimes you just need to trust your instinct. Having said that, if you are investing for the long term, you have a great ally on your side – time.

When your investment plan is counted in decades rather than months or quarters, time becomes your best friend. This is because over the long term, stock market has the tendency to go up. So if you are investing for 10, 20, 30, 40 years or even longer, you don’t really need to pay attention to the short term volatility. It doesn’t really matter if your portfolio is down or up. Since you’re not selling anything, these are unrealized losses or gains. Let’s put it in a different perspective. Say you own your house and plan to live there for all your life. Does it matter if your house is worth $20k or $20 million today? If you don’t plan to sell or re-finance your home, the value of the home does not matter to you.

With that in mind, we recently added the following stocks:

32 shares of Royal Bank (RY.TO)
66 shares of National Bank (NA.TO)

Both companies we already own in our portfolio. The Canadian banks have taken a lot of beatings due to the low crude oil price. Royal Bank currently has a PE ratio of 10.2 and dividend yield of 4.6% while National Bank has a PE ratio of 8.3 and a dividend yield of 4.66%. I think both are extremely cheap, especially considering we purchased both stocks when the stock price was very close to the 52 week low.

Why Canadian banks rather than oil & gas as I indicated in our 2016 early stock considerations? I think crude price will continue to be very volatile. Earnings of oil and gas companies will continue to suffer in 2016. We are putting cash aside to buy more oil & gas stocks in the near future but I believe right now the Canadian banking stocks are more appealing from an evaluation point of view. Canadian banks did not cut their dividends during the financial crisis. They simply paid the same amount of dividends. Considering the likes of Royal Bank, Bank of Nova Scotia, and TD have been paying dividends since the mid 1800’s, it’s hard to look the other way when these bank stocks are so cheap. Even if National Bank and Royal Bank do not raise their dividend payouts this year, having +4.5% yield on cost allows us to sit and wait.

These purchases will add $243.68 in our annual dividend income. We’ll probably continue to be busy on the purchase front in the next few months.

What do you think about these purchases? Have you made any purchases recently?

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32 Comments

  • Reply
    Our Big Fat Wallet
    January 27, 2016 at 6:16 pm

    Both good purchases. The recent dip in the markets is a great opportunity to lower your average cost. Both RY and NA went lower than I expected and I also bought some RY shares. As you mentioned they both may go back down in the short term but I am not worried at all in the long term

    • Reply
      Tawcan
      January 29, 2016 at 2:48 pm

      Hi Our Big Fat Wallet,

      Thanks. Seems that everyone’s buying banks nowadays.

  • Reply
    Dividend Hustler
    January 27, 2016 at 7:32 pm

    Great purchases Tawcan. Way to take advantage of the market drop. Love it. Thanks for sharing these buys. I’m gonna add more National bank tomorrow or next couple days here and hope it drops a bit. Cheers and take care buds.

    • Reply
      Tawcan
      January 29, 2016 at 2:49 pm

      Thanks Dividend Hustler. Lucky that we had cash on hand to take advantage of the market drop.

  • Reply
    Dividend Wisp
    January 27, 2016 at 7:59 pm

    Excellent pick ups Tawcan. I am leaning pretty heavily towards a bank being my next buy as well, TD, RY or BNS. Its awesome seeing their yields between 4-6% these days.

    • Reply
      Tawcan
      January 29, 2016 at 2:49 pm

      It’s very attractive considering how strong the yields are.

  • Reply
    Norm
    January 27, 2016 at 8:18 pm

    Nice buys! We own very few individual stocks (maybe 20 total?) but actually have TWO Canadian banks, Royal Bank and Bank of Nova Scotia. Those long histories of paying dividends are what sold me.

    • Reply
      Tawcan
      January 29, 2016 at 2:50 pm

      The big five Canadian banks have been paying dividends for a very very long time now. The strong dividend history is a good reason to buy these stocks.

  • Reply
    Dipu
    January 27, 2016 at 8:40 pm

    Great purchase Tawcan. I was looking to average down RY but i missed the 52 week Low. I am just waiting patiently to buy some more.

    • Reply
      Tawcan
      January 29, 2016 at 2:51 pm

      Hi Dipu,

      I’d keep my eyes open. I think we’ll see more volatility up ahead.

  • Reply
    Dipu
    January 28, 2016 at 6:49 am

    Tawcan what’s your view on potash . They slashed the dividend by 34%

    • Reply
      Tawcan
      January 29, 2016 at 2:53 pm

      Hi Dipu,

      Good question. We have invested a small amount of money in Potash but our cost basis is way higher than today’s price. I think the dividend cut was expected, considering the extremely high yield and high payout ratio. It’s actually good long term move that Potash cut the dividend by 34%. Reservation of capital is very important in the downturn. I’ll continue holding Potash and DRIPing.

  • Reply
    Karen
    January 28, 2016 at 7:17 am

    I purchased RY several years back when I first started investing in stocks. To be honest, it was based on my mom’s advice. Lol. Some other Canadian stocks I own are Fortis, Brookfield Asset Management, Telus and CNR. I recently purchased an ETF that holds US and international agricultural stocks.

    • Reply
      Tawcan
      January 29, 2016 at 2:55 pm

      We purchased RY many years ago as well. It simply makes sense to take advantage of the price drop. We don’t hold Brookfield but have been looking to add to our portfolio.

  • Reply
    Team CF
    January 28, 2016 at 10:45 am

    Same as Dipu, we sadly missed the 52 week low, but are still considering buying RY and/or NA. Even at todays prices, they ares still is a good deal!

    Too bad about the news on the dividend cut at POT, it was coming, but it still stucks.

    • Reply
      Tawcan
      January 29, 2016 at 2:55 pm

      Yeah the POT dividend cut sucks but it’s better than them cutting dividend completely.

  • Reply
    Mark Seed (@myownadvisor)
    January 28, 2016 at 3:47 pm

    Wow, some hefty purchases there. Nicely done. Happy DRIPper of all big bank stocks. 🙂

    • Reply
      Tawcan
      January 29, 2016 at 2:56 pm

      Happy DRIPer here too. 😀

  • Reply
    Weekend Reading – Boomers, money tips, investing success and bear markets - My Own Advisor
    January 28, 2016 at 7:17 pm

    […] Tawcan went shopping for these Canadian bank stocks. […]

  • Reply
    DivHut
    January 29, 2016 at 12:11 am

    Two great buys. As you know I continue to like the large Canadian banks at these levels and added to my BNS earlier this month. Those names continue to make my ‘considerations list’ going into Feb. Nice current yield to be getting while you wait for prices to recover. Thanks for sharing.

    • Reply
      Tawcan
      January 29, 2016 at 2:56 pm

      You got it DivHut. With the high yield and strong dividend histories, we can afford to wait for the prices to recover.

  • Reply
    Tristan @ Dividendsdownunder
    January 29, 2016 at 5:01 am

    2 really good buys. Lots more good dividend income, safe buys, good yield (and it’s the dividend is what we’re after moreso right?). What’s not to like?

    • Reply
      Tawcan
      January 29, 2016 at 2:57 pm

      Exactly! 😀

  • Reply
    Mitch
    January 29, 2016 at 10:07 am

    Great buys. I also recently bought shares in RY and NA as well as a few hundred each of T, BCE, FTS, ENB, RCI.B, BNS, and SJR.B. I love buying large amounts when the market takes a nose dive.

    • Reply
      Tawcan
      January 29, 2016 at 2:57 pm

      You’re definitely deploying a lot of capital. Love it!

  • Reply
    Jayson @ Monster Piggy Bank
    January 30, 2016 at 5:08 pm

    Congrats Tawcan! Are you also investing in a hedge fund?

    • Reply
      Tawcan
      February 1, 2016 at 4:20 pm

      Hi Jayson,

      No we don’t invest in hedge funds.

  • Reply
    Laura Beth @ How to Get Rich Slowly
    February 1, 2016 at 3:07 am

    Congratulations, sounds like you’re on your way to some serious passive income. I’ve just started focusing more on dividend investing and I have a lot to learn in that area. Thanks for sharing your insight.

    • Reply
      Tawcan
      February 1, 2016 at 4:21 pm

      Hi Laura,

      No problem, there are lots of things to learn when it comes to dividend investing. Let me know if you have any questions.

  • Reply
    Dividend Beginner
    February 2, 2016 at 10:35 pm

    Hey Tawcan,

    Great choices bud! I picked up RY not long ago and have been playing with the idea of NA in my head. I’m afraid to go too heavy in Canadian financials but the bargains are all over the place… hard not to.

    DB

    • Reply
      Tawcan
      February 3, 2016 at 11:08 pm

      Hi DB,

      Definitely hard not to be heavy in Canadian financials, so attractive right now.

  • Reply
    BeSmartRich
    February 4, 2016 at 7:52 am

    You will never go wrong with Canadian banks. Solid buys Tawcan. Congrats!

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