Stock Market Series

Are All Canadian High-Yield Dividend Stocks Investable (Part 3)?

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I started writing “Are All Canadian High-Yield Dividend Stocks Investable” because I am wondering if companies that are paying a lot of dividends are actually financially sound.

In Part 1, we have looked at Altagas, and Inter Pipeline.

In Part 2, we have evaluated TransAlta Renewables, Peyto Exploration, Vermilion Energy and IGM Financial.

In this final part, we will analyze CI Financial, Pembina Pipeline and CIBC.

CI Financial (TSE:CIX)

CI Financial Corp. is a wealth management and investment fund company. The company is engaged in management, marketing, distribution and administration of mutual funds, segregated funds, exchange-traded funds, structured products and other fee-earning investment products for Canadian investors.

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Just by looking at the P/E ratio, I think I would invest in CI Financial because the company is still pretty fairly valued (Remember! I only invest in stocks that have P/E ratios lower than 20).   The next step would be to do a financial statement analysis of CI Financial to see whether the company is performing well fundamentally.

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Unfortunately, I would not invest in CI Financial because the company’s retained earnings is negative.  I would not invest in any company that has no cash reserve.

Pembina Pipeline (TSE: PPL)

Pembina Pipeline Corp. is an energy transportation and service provider. Furthermore, the company is a leading transportation and midstream service provider that has been serving North America’s energy industry for over 60 years. Pembina owns and operates an integrated system of pipelines that transport various hydrocarbon liquids including conventional and synthetic crude oil, heavy oil and oil sands products, condensate (diluent) and natural gas liquids produced in western Canada and ethane produced in North Dakota.  The company also owns and operates gas gathering and processing facilities and an oil and natural gas liquids infrastructure and logistics business.

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I know I am not going to invest in Pembina Pipeline because the company’s P/E ratio is just TOO HIGH.  The stock is currently OVERPRICED.

Canadian Imperial of Commerce (TSE:CM)

Canadian Imperial of Commerce (CIBC) is one of the five biggest Canadian banks and is also a global financial institution.  The bank provides a range of financial products and services to approximately 11 million individual, small business, commercial, corporate and institutional clients in Canada and around the world.

I have concluded a few months that CIBC is investable when I evaluated the financial statements of all five biggest Canadian banks.  Nevertheless, it is always nice to keep yourself updated.

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Although P/E ratio slightly increased from two months ago (it was 9.02), it is still low. This demonstrates CIBC is still very reasonably priced.

Pursing this further, I would post my last financial statement analysis of CIBC from two months ago since the company has not released its latest financial reports.  I have concluded CIBC exhibits durable competitive advantage.

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Ultimately..

Companies that pay great dividends DO NOT mean they are financially sound.

Often time, they may pay huge dividends just to attract shareholders to invest in their companies.

So you may ask…

“So should I just buy any dividend stock that are financially healthy then?”

I would say..

“It depends.”

I rather invest in a company with good growth that doesn’t pay dividends than a company that pay dividends but it is not doing well financially.

So if are interested in a low-yield dividend stock or any non-dividend-paying stock but you anticipate the company will grow five times the size and its stock price will grow ten times in the next five year, THEN GO FOR IT!!

Please feel free to comment below! Catch you on the flip side!

 

34 thoughts on “Are All Canadian High-Yield Dividend Stocks Investable (Part 3)?”

  1. I have never tried investing in dividend stocks before, but I agree with you on this point. I learn something new from this post.

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  2. Awesome site and really cool post. I wish stock market investing was taught in school — kills me that it’s not required!

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  3. That’s really interesting! I learned a lot about investing after reading this. It’s really important to do your research especially when you’re interested in investing in a specific company.

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    1. Yes it is. You think companies pay huge dividends because they are doing well financially but that’s not necessary. I really do believe research is crucial so you know what you are investing into. Thanks for their support!

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  4. Wow, there’s a lot to digest here – you kind of lost me with so many details! This is a world I don’t really understand very well. I have a financial advisor from Edward Jones – someone I’ve known since college my first time around, for over 37 years – so I trust his advice and actions on my behalf!

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    1. You are lucky that you have a financial advisor you can count on. Unfortunately, a lot of advisors nowadays only care making commission rather than meeting their clients’ needs.
      By the way, I tried to simplify my blog post, but I find it is very hard. I will keep trying =D

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  5. So what does the street say about Canadian Imperial of Commerce (CIBC)? It’s had a pretty good run, although it still may be reasonably priced. Sometimes I like to find the companies that everyone doesn’t like but have good stories…

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