Canadian banks are among the healthiest in the world and are currently trading at higher multiples than many peers, but their international expansion and dividend growth represent an opportunity for investors looking for stable, income-producing companies, says Willem Hanskamp, Chief Investment Officer at C.F.G. Heward Investment Management Ltd.
“[Canadian banks] are not the cheapest banks in the world. You wouldn’t expect them to be because they have done so well. So they get rewarded with slightly higher multiples than, for instance, some banks elsewhere that might have gone through some major restructurings or issues,” Hanskamp said.
Hanskamp likes The Toronto-Dominion Bank (TD) because of its successful expansion into the U.S. market and its earnings trends. He says TD Bank has resumed raising its dividend after regulators became more confident in the banking industry overall, and the bank seems financially secure.
“TD Bank has done actually quite well also in terms of earnings, earnings trends and the valuation is still very reasonable, around 11, 12 times earnings,” Hanskamp said. And he added, “since about a year ago, they can and they have started to raise dividends, and we think they will continue to do so.”
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