The banks are all offering a rate of return (IRR) of 9 or 10%, which is quite good. Strongest returns (10% or more) are offered by Bank of Montreal (BMO.TO), which I own, National Bank (NA.TO) and CIBC (CM.TO). Of these three, BMO offers the highest dividend.
Banking is a low growth industry: none of the banks offer a PEG Ratio below 1; and none of the banks has an earnings growth rate of 9% or more.
I’m happy with BMO.
In contrast to the banks, the insurers mostly seem to offer an IRR of 11% or more. The lowest is Power Corp (POW.TO) at 9.99%, which is the one insurer that I own!
From a PE Ratio perspective, Indus Alliance (IAG.TO) and Manulife (MFC.TO) offer the best value. Manulife also has a PEG Ratio below 1, as do Power Financial (PWF.TO) and Power Corp. Manulife also has a decent dividend, although second lowest amongst the six insurers analyzed.
Power Corp, which I own, has PE Ratio of 11.1 (a high price for this group) but, due to strong growth estimates, it has a has a PEG Ratio below 1 (the growth justifies the price). It has a decent dividend but, like Manulife, not best in class. Dividend coverage is not as strong as Manulife’s.
Overall, I’d say that Manulife is a better value stock than Power Corp, but I don’t feel strongly enough about this to trade at this point. I’ll stick with Power Corp.