Category Archives: Seeking Alpha article

CIBC: Stable And Safe With A 5% Yield

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) generates stable earnings, which translates to a stable stock most of the time. Stable earnings coupled with a sustainable payout ratio makes CIBC’s current yield of 5% solid.

CIBC’s stock often gives the notion that it underperforms the other Big Six Canadian banks, but as we shall see, that’s not always the case.

Year-to-date results

In the first nine months of the fiscal year, CIBC reported adjusted earnings per share (“EPS”) of C$9.07, down 1.5% against the comparable period a year ago. These are stable enough earnings and led to a payout ratio of just under 46%. As well, its return on equity fell 2% to 15.8% year over year.

Is CIBC a Buy?

Over the next 3-5 years, the other Big Six Canadian banks are estimated to experience EPS growth that will be more than twice as fast as CIBC’s estimated EPS growth of 2.2%. Therefore, the stock trades at the lowest P/E among the banks for a reason.

It’s best to consider names like Toronto-Dominion Bank (TSX:TD)(NYSE:TD) or National Bank of Canada (TSX:NA) for long-term investment, especially on dips.

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The King Of Content Is Bigger And Better And This Is What I’m Doing

Walt Disney (NYSE:DIS) is a king of content but it needed to deliver that content to consumers the way they want to consume it. Since 2016, it has begun transforming for that need…

Should You Buy Disney Today?

The last year was a major investment year for Disney, namely Twenty-First Century Fox for $71 billion and capital expenditures (“CapEx”) that were up 9.2% year over year to $4.9 billion, and the CapEx is set to increase by a further 10% next year.

Moreover, Disney expects the DTC & International segment to generate ~$800 million in operating losses for fiscal Q1 2020 but to be accretive to EPS for fiscal 2021 and realize cost synergies of more than $2 billion from operating efficiencies by 2021.

Because Disney is fully valued today, we think there are better investment ideas out there, such as from our top dividend ideas list. Investors may just get a better entry point in the coming 12 months.

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A Cheap Financial Stock for Extraordinary Price Gains

Fairfax Financial Holdings Ltd. (TSX:FFH) is a curious stock that moves differently from the U.S. and Canadian stock markets. This potentially makes Fairfax a good candidate to trade while adding diversification to investors’ stock portfolios.

The Business

Fairfax’s business model is similar to Berkshire Hathaway’s (NYSE:BRK.A)(NYSE:BRK.B). It has an underlying insurance business that generates float as a source of low-cost capital to invest for higher returns. Fairfax’s insurance businesses operate on a decentralized basis, which allows Fairfax to focus on capital allocation.

In the first half of the year, Fairfax’s insurance businesses were profitable. It had a consolidated combined ratio of 96.9% for its insurance operations. The combined ratio of <100% implies profitability.

According to Prem Watsa, the chairman, CEO, and founder of Fairfax, the company can achieve a 15% return on shareholders’ equity with a 95% combined ratio and a 7% return from the investment portfolio.

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