Wednesday, December 3, 2008

No Dividend Cuts Yet From Canadian Banks

Canadian banks are currently in the midst of reporting their latest quarterly earnings and they are not pretty. Write-downs and losses are dragging down these earnings reports in a major way. That being said, no Canadian bank is yet to cut their precious dividend yet.

Dividend growth from these banks is in neutral as no raises have been announced in some time. Pay out ratios will likely creep up as earnings come down. Here are how the yields for the big 5 oligopic Canadian banks appear today:

The Bank of Nova Scotia (BNS) = 5.6%
Toronto Dominion Bank (TD) = 5.8%
Royal Bank of Canada (RY) = 5.1%
Bank of Montreal (BMO) = 7.9%
CIBC Bank (CM) = 7.6%

It will be interesting to see if any of these dividend growth stalwarts cut their dividends as we have seen in spades in the U.S. So far the yield alone seems to indicate that CIBC and BMO are the most likely to cut their dividends if any of the banks take out the scissors.

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  1. No Canadian bank wants to be the first to cut the dividend, but cuts will be likely if bad economic indicators keep coming such as the dismal new auto sales just announced by USA.

  2. I think the CDN banks are sitting in an enviable position compared to other global financials. They've all had little problems raising equity in the open market (prefs or common) and continue to operate from a strong retail base. What we've seen in writedowns so far have been largely minimal in comparison to others hit hard by this credit contraction.
    Nothing is impossible, but I think despite continued price pressure on them they'll do well over the long-term.


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