Investment Q&A

Q: Canadian banks have all dropped in value YTD by up to 6%. I understand that this is due in part to concerns about energy-related loan losses as well as high consumer debt levels. What is your call on what will cause the declining trend to stop, and when that might be ? From a technical point of view, where is the support level for RY ?

Q: A couple banks have recently issued rate-reset preferreds at very favorable terms, 5%+ and a floor at reset. Why would tap the equity market when the cost of debt is so much more favorable to raise capital?

Q: Can you comment on the recent issue of Royal Bank reset preferred
shares Series BK? Are they a suitable investment in the current
climate or are they in the same boat as other reset prefs? Thanks.
Joe

Q: Royal's latest preferred offering seem to be surprisingly good one, is it?? 5.5%yield and 4.53% reset. Is it a good buy? How will future interest increase effect the price? Is it trading, has a trading symbol?
Many thanks for your help. J.A. P, Burlington

Q: Which Canadian bank is your favorite, being the one that will offer the most growth and capital appreciation over the next 5 years? TD, RY, BNS, BMO, or CM?

Q: Just wondering about your take on the Canadian Banks going to the yearend. I bought them in the spring for a long term hold and am down about 10%. I know short term trades are mugs game but am considering them for some early tax loss selling and buying back later on in the fall, after 3Q earnings and the election. Doesn't seem to be much catalyst for them to go higher and with all the uncertainty I wonder if they'll drop some more.

Q: 1:10 PM 26/08/2015
Hello Peter
I am interested in buying one or two of RY, CM, TD, SLF, GWO, MFC. Would you comment on the robustness of their balance sheets and provide some numbers on their Debt/Equity and Debt/Cash Flow ratios, Dividend growth rates, and possible "Black Swan Events". I look at various financial website sources and the numbers for these companies are all over the shop.
Thank you. Paul K.

Q: Why RY is heading lower after they report good earnings and increase their dividend.
Did I missed anything on earnings.

Q: What is your opinion in buying Canadian bank preferred shares in the income
allocation portion of your portfolio as opposed to bond ETF's?
Best regards,
Oleh

Q: I received a lump sum and for a short time I would like to put the funds into some stable stocks who pay a quarterly dividend and who's X dividend date is from now until the end of April. I would like an annual yield of 3.5 - 8%. I will then bleed the money out into a dividend growth model of 5i stocks. I have looked at 28 stocks and only found 2 Ry 4/21 & pot 4/9 x dates. The stocks I have checked are Ala, bus,td, bce, enb, xtc,and,ipl, key,pki, ppl,stn,vet,ten,win, syz, ago, cox, bin, dh, slf, wsp, t, wsp,van,tcp. Thank you very much, your site has incredibly valuable information which I check each day. mike

Q: Hi guys,

I want to limit exposure to the financial sector to 20% of my portfolio. I currently own TD and BNS and with the recent pullback in the major CDN banks, I'm thinking of adding 2 additional banks and I'm thinking about BMO and RY. I don't want to invest in an insurance company since no one can be sure when rates go up and I'm not sure about Home Capital Group since it is more concentrated in its business than the major CDN banks and the yield on the major CN banks are twice that of HCG? Your thought? It is risky to hold 4 major CDN banks in my portfolio if overall exposure is capped at 20%?

Thanks,
Jason

Q: Hello, I have recently reviewed the management fees on RRSP accounts I have with an investment firm. I have reviewed the funds that They have me currently invested in and have found similar mutual funds with RBC, all D series funds. I have calculated the loss due to higher MER and am shocked by he difference it would have made in my accounts. While I have money that I invest on my own, I like the idea of having some stashed away in managed funds (I like doing my research on smaller companies and trust the bigger names to the professionals). The "d series" funds with RBC have considerably lower MER. Is that the best way for me to reinvest my mutual funds once I move them over to RBC? Is there a better or cheaper way to invest those funds? ETF's you would suggest? Is there anything out there that would suit my needs better than the RBC D series funds? I have approx 1/3 of my investments tied up in these funds at this time with my current investment firm. For what it's worth I suggest anyone who has Mutual funds with an investment firm look at the MER for each fund they are invested in. There are cheaper ways to have your money managed, the best I found so far are RBC D series funds. If you have a better suggestions, I am all ears.

Q: Is the Royal downgrade justified

Q: I am developing my portfolio to be an income generator and like many Canadians, have a significant portion of my capital in Canadian banks. What do you feel is a suitable % range for Canadian banks in an income portfolio? I am certain I am too heavily invested today in the banks but the recent drop was too inviting so more had to be bought. Thanks in advance.

Q: Dear Agent. Would RY be a good stock to purchase at the present time 1/11/2015. Eddie.

Q: what's your opinion of RY compared to BNS and TD? I believe RY has outperformed in share price over the last 10 years compared to the other banks.

Q: Hello Peter, I wish to better understand why P/B ratio is important. What is the ideal P/B ratio for a big cap company? The P/B ratio of Royal Bank on TMX Money is 2.36, and the same ratio for National Bank is 1.96, which one has the best P/B ratio? Thanks, Gervais
http://web.tmxmoney.com/quote.php?qm_symbol=RY:TSX

Q: Hi Peter and the 5i team, It is always interesting to read the Q & A section. In relation to your reply to Maggie's question and Scot's follow up, I am as close to Harry as you can get. I purchased Royal Bank for 7.27 per share in 1994; never touched it. I have to spend the dividend as I depend on it for income (the real meaning of income-investing)so that my wife can go shopping and I go to canadian tire - the usual thing. The yield of the shares on cost is 40%. My problem is that it is getting to be 9% of the portfolio. My only regret is that I didn't do it with all my bank shares. I am putting this out to underline that it is real, not just a hypothetical situation. Henry

Q: Here is a general question. If anyone knew yesterday that Royal was going to report a 2 billion profit and clean beat all over, would they not have backed up the truck before today, in anticipation of a short term bounce? Instead, it is down a quarter. What does this say about the rationality of the markets. Is it possible there is more luck involved than is acknowledged and is a lot of investing similar to the lottery, notwithstanding common sense and a long term horizon. Thanks

Q: Hi
I read your excellent answer to Dave this morning in which you say "The main drivers to equities are (1) earnings (2) interest rates and (3) money flows (people going to cash/shifting from bonds to stocks). If earnings are strong and growing, and interest rates are low (i.e right now), it is hard to predict a big fall in the market.
I want to buy additional shares in Royal Bank [RY] but I have been watching the price rise steadily since the summer and am severely conflicted. Do I just go ahead and buy now because of the 3 parameters you mention are in force, or do I wait for a hoped-for 5% or more market pullback?
The current payout ratio is 49% for RY and the yield only 3.81% so I would expect a dividend increase because of the rising stock price and falling yield, but with the payout ratio so high [normally in the 45% range I believe for banks] is this even likely?
Many thanks... Paul