buy back shares or increase dividends since March 2020, which piled up more capital, which was already at a record high. Sitting on a total of CA$21.4 billion (US$17.3 billion) in allowances against loans, Canada’s lenders are now considered to be “among the best-capitalized banks globally”.
Therefore, income-thirsty investors are eagerly awaiting a hike in dividends, which could be as much as 25 per cent, once they are given the green light by the regulators, according to market analysts. Canadian banks have remained resilient amid the global health crisis, and as their profits continue to strengthen, Toronto-based Hamilton Capital Partners claims that the increases make be even larger if bank executives want to slow the growth in their capital levels.
“This huge reserve represents a powerful firewall against unexpected losses,” the firm said. “There has literally never been a time in Canadian bank history where the sector was in a stronger position to pay dividends.”
The big six banks in the country are a staple in the average Canadian investment portfolio either directly or through equity mutual funds and exchange-traded funds (ETFs). Over the years, bank dividends have remained a saving grace for investors who are seeking a steady income to offset the risk from equities in their portfolios, and provide reliable cash in retirement.
According to recent reports, investors of the Bank of Nova Scotia are expected to be rewarded with an average 4.4 per cent dividend yield, followed by the Canadian Imperial Bank of Commerce, at 3.9 per cent. The Toronto-Dominion Bank in on track for a 3.6 per cent dividend yield this year, while investors of the largest bank in the country, the Royal Bank of Canada, together with those of the Bank of Montreal, slated for a 3.3 per cent annual dividend yield.
