When will we see the Canadian banks increase their dividends again? Which of the Big Five will raise their dividend first?
All Canadian income investors would love to know the answers to these questions. Of course, smaller Canadian banks have already begun to increase their dividends. Laurentian Bank of Canada (TSX: LB) hiked its dividend just five quarters after the big Lehman crash – meanwhile, all the others are sitting tight on piles of accumulating cash while we wait to hear the results from Basel III.
Which of the Big Five Should You Invest In Next?
National Bank
(TSX: NA) – One analyst I listened to said he thought that National Bank was the top contender for raising its dividend first because of their conservative positioning in relation to the U.S. equity markets. In other words, they have no U.S. exposure, so they don’t need the kind of fortress capital that Manulife (TSX: MFC) does. A dividend raise here would be easy and safe.
TD Bank Financial Group
(TSX: TD) – More recently, TD Bank was picked out as the first, most likely candidate to increase their dividend post-recession because of the mountains of free cash flow that continues to grow as growing interest rates work in their favour. The CEO has done a great job of growing retail and investment operations and apparently they’re just waiting to hear about Basel III capital requirements before they can spin some of this back to investors.
One bank that is probably least likely to bump up its dividend in the near-term is CIBC (TSX: CM). CIBC’s payout ratio is still too high, and it hasn’t grown as much as the others throughout the recovery.
Basel III announcements are supposed to come out in the fall of 2010, so stay tuned and expect to hear word from the banks on possible dividend increases shortly afterwards.
Bored of the Big Five? Check out Australia’s Big Four
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{ 3 comments }
I’m voting for NA – for many of the reasons you said above. I also think BNS stands a good chance as well.
While I’d like to see CIBC and BMO increase theirs, I don’t think it’s a great move this fall. I can wait :)
@FC – I agree. It will be NA or TD. BNS is in a good place, too, but I think they’re going to wait.
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