Tuesday, May 20, 2008

Retesting the waters of the bank sector

WHAT ARE WE LOOKING FOR?

After a pair of bleak quarters in which Canada's Big Six bank stocks sank almost 20 per cent, investors have started retesting the waters of the sector, long a blue-chip mainstay of many portfolios.

Mouth-watering dividend yields are a key attraction: Bank stocks are now yielding 4 per cent, topping the yield on the Canadian government's 10-year bond (currently at 3.6 per cent) for the first time in decades.

But which banks to buy? For that, we return to well-regarded equity quantitative-analysis firm CPMS Computerized Portfolio Management Services Inc., which has crunched the Canadian banking numbers and identified the key metrics that historically have pointed to superior stock performance.

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