‘Perspective…’
While this market correction hasn’t been deep, particularly for the Canadian side of portfolios, the length of this pullback may be bothersome. That said, corrections or bear markets of this length are completely normal for investors.
Let’s look at some dread short-term and then look at history through some visual charts for some banks, tech, stocks and utility stocks – for perspective.
National and Royal Bank so far – current year 2022 (above) and for the past ten years (below).
National Bank – Over ten years, the stock has gone from $24 to $90.94 (current pullback value). That is an average annual growth of 27.89%, excluding the dividend. The current dividend of $3.68 equates to a 4.04% yield today. However, if you bought the stock ten years ago at $24, your current yield would be 15.3%. ($3.68/$24).
Most of the banks make about $1 billion dollars each month. Most raised their dividends again last quarter and all of them pay their owners more than they do depositors.
Technology led the market over the previous three years but is the worst performing sector this year.
Microsoft and Apple so far– current year 2022 (above) and for the past ten years (below).
Microsoft – Over ten years, the stock has gone from $25 to $244.74 (current pullback value). That is an average annual growth of 87.9%, excluding the dividend. Most growth stocks tend to have low dividends. The current dividend on Microsoft of $2.48 equates to a 1.01% yield today. As a result, this is a sector where I seek to sell call options to enhance/create income that might not otherwise exist. Further, the call option income is taxed as capital gains and as such creates some downside protection.
Utilities:
Brookfield Infrastructure and Fortis so far– current year 2022 (above) and for the past ten years (below).
Brookfield Infrastructure – Over ten years, the stock has gone from $10 to $53.78. That is an average annual growth of 43.8%, excluding the dividend. The current dividend of $1.89 equates to a 3.52% yield today. However, if you bought the stock ten years ago at $10, your current yield would be 18.9%. ($1.89/$10).
Hopefully, the ten-year charts above provide perspective, that nine months can sometimes blur. It is not different this time. The Canadian side of the portfolio provides income and growth where the U.S. side is more growth oriented. The idea is for the portfolio is to provide income in a bear market while providing both income and growth in a bull market.
If you have any questions or would like to discuss any aspect of your portfolio or market, my team and I are a phone call away. In addition to our online meetings, we are now hosting client meetings again in our Victoria office by appointment.
Best regards,
National Bank Financial
Rob Hunter
Senior Wealth Advisor
Sources: Stockcharts.com, Bloomberg, Reuters,
National Bank Financial is an indirect wholly-owned subsidiary of National Bank of Canada. The National Bank of Canada is a public company listed on the Toronto Stock Exchange (NA: TSX).
This information was prepared by Rob Hunter, a Senior Wealth Advisor with National Bank Financial. The particulars contained herein were obtained from sources that we believe reliable but are not guaranteed by us and may be incomplete.
The opinions expressed are based on our analysis and interpretation of these particulars and are not to be construed as solicitation or offer to buy or sell the securities mentioned herein. National Bank Financial may act as financial advisor, fiscal agent or underwriter for certain of the companies mentioned herein and may receive remuneration for its services. Rob Hunter, National Bank Financial and/or its officers, directors, representatives, and associates may have a position in the securities mentioned herein and may make purchases and / or sales of these securities from time to time in the open market or otherwise.
The opinions expressed herein do not necessarily reflect those of National Bank Financial.
Several of the securities mentioned in this article may not be followed by National Bank Financial’s Research department. The investment advice given only applies to residents of the provinces of British Columbia, Alberta, Manitoba, Ontario and Quebec. National Bank Financial is a member of the Canadian Investor Protection Fund.
