Opinions
Bryden Teich
Royal Bank of Canada
RY.PR.A-T
BUY
Mar 01, 2018
Stock price when the opinion was issued
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Preferred Series AG, perpetual dates in 2016. This series is a perpetual preferred and is the longer term. These come up for redemption after, usually about 5 years. This one is 2016 for the 1st call and is $26. They were originally issued at $25. The bank usually doesn’t call these. Each year following that, the Call price of $26 goes down by $0.25 until it gets to $25 again. Usually at that point they will Call.
Believes interest rates will be higher for longer which will increase profits. Dividends combined with share buybacks creating shareholder return. Good for long term investors. Not concerned about mortgage stress with higher interest rates. Baby boomers leaving work force creating job opportunities. Doesn't think US Fed will raise rates too high (crush consumers).
Outlook for company positive. About to close HBSC Canada acquisition. Will realize synergies from HSBC deal. Last quarter earnings strong. Wealth management business very strong too. Question is whether interest rates will go up or down (impacts bank business in lending etc.) Solid dividend paid to shareholders in the meantime.
The Canadian banking sector is doing well overall but TD and Royal are his two top picks. They have great U.S. exposure, which provides great opportunities for growth.