Canada’s banks have continued to perform in a steadily-improving fashion, much to the appreciation of long term investors banking on continued growth in the oligopoly which represents Canada's lending system.
While most investors focus their time and energy on analyzing the country's five or six largest banks, a number of smaller regional banks represent interesting opportunities for dividend or income-focused investors, given the relative premium in yield investors typically receive for owning shares in these smaller entities.
One such bank which has recently raised its dividend following stronger than expected earnings is National Bank of Canada (TSX:NA).
The Canadian lender increased its quarterly dividend distribution to $0.62 from $0.60 previously, resulting in a yield which is hovering right around 4% per year; given the fact other large Canadian banks are yielding substantially less than National Bank, the temptation for many (and rightfully so) could be to add National Bank as a dividend-based financials play, banking on a rising interest rate environment and other tailwinds in this sector to continue to support an increasing valuation multiple over time.
While National Bank remains relatively attractively valued when compared to its peers, the fact remains that as a smaller Canadian lender, National Bank carries a different risk and reward profile - for long-term investors, I recommend checking out Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) for a dividend/value play as well as Toronto-Dominion Bank (TSX:TD)(NYSE:TD) for a long-term growth play in the financials sector.
Invest wisely, my friends.
