Banks as Investments – Works for Me

One of my best performing companies has increased its dividend yet again – an increase 0f 11% to $0.40 per share per quarter. This increases my yearly dividend income to $978 from $929. In addition, Royal Bank had a pretty good run up over the last couple of days in anticipation of the earnings increase.

I been very happy with Royal Bank, in fact it is the best performing stock in my portfolio with an annualized return of 24%. I am sure there are many investors in Canada who are in similar situations as banks tend to be very large holdings for portfolios due to the performance as well as the higher than average dividend yields our banks tend to through off. I don’t think it is much different in the United States as companies like Citigroup and Bank of America (which I own) have had good performance through the years and throw off a good dividend.

I believe that every portfolio should have at least one bank in them. If you hold any type of mutual fund (balanced, Canadian equity, US equity) you more than likely hold banks within that. My experience has been that banks do not have too much in terms of volatility (although some have more than others) and throughout history they have showed good share price appreciation. The chart below provides a snapshot of this (mind you the farthest I could go back was 2001):

As my portfolio continues to grow I will look at adding other banks.