Want safe stocks? Be ready to pay

ShareSave for laterPlease log in to bookmark this story.Log InCreate Free AccountSafety has rarely been so expensive in the stock market. Which has to make you wonder if supposedly safe stocks are now all that safe after all.Canadian bank stocks offer a case in point. As Jason Kirby pointed out this week, this country’s dominant financial institutions are suddenly trading at historically lavish price-to-earnings (P/E) multiples. For much of the past two decades, their shares fetched somewhere between 10 and 12 times earnings. Now they are changing hands at P/E ratios of 14 to 18 times. This does not make a lot of obvious sense. A company’s P/E multiple typically shoots up if its growth outlook suddenly brightens or if its risk plummets.

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Excerpt limited to ~120 words for fair-use compliance. The full article is at The Globe and Mail.