Cue from SEC: Will Bank of Canada finally allow banks to raise dividends?

The US Federal Reserve announced on Thursday, June 24, that all banks in the country passed bad debt stress and have sufficient capital to raise their dividends.

On the back of this approval, investment banking entity JP Morgan doubled up its quarterly dividend distribution. 

In Canada, the big six banks have already reported the availability of excess capital in their balance sheets in the last two consecutive quarters. Bay Street-based analysts have even triggered discussions around how the ‘big six’ banks plan to utilize their overflowing cash reserves as the Bank of Canada is yet to relax the rules preventing dividend hikes in the country.

There is also a discussion cropping up now as to whether the Canadian financial regulator may follow the neighboring country’s stance and relax all COVID-induced regulations that led to the pause on dividend hikes and stock buybacks. 

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The pause on dividends was introduced to ensure that creditors had enough liquidity in their inventories. But with their reserves now significantly robust and the pandemic impact is waning, some experts note that that the regulator could reverse its decision.

Let’s take a glance at the top Canadian banks’ dividends and dividend yield performance.

  • Royal Bank of Canada (TSX:RY) continues offering a quarterly dividend of C$ 1.08 apiece for the last six months. Its current dividend yield stands at 3.441 per cent, almost half against its five-year dividend yield growth of 6.45 per cent.
  • Scotiabank (TSX:BNS) has been distributing a constant dividend of C$ 0.90 apiece for the last two years. Despite the bank’s one-year return of 45 per cent, its dividend yield is marginally down against five-year average dividend growth.
  • Toronto Dominion Bank (TSX:TD) has been delivering a quarterly dividend of C$ 0.79 per share since the first quarter of 2020. Its dividend yield is 3.636 per cent, down from five-year dividend growth of 8.58 per cent.
  • Bank of Montreal (TSX:BMO) has been paying C$ 1.06 apiece of quarterly dividends to its shareholders for the last seven months. The creditor’s dividend yield has touched 3.336 per cent compared with five-year dividend growth of 10.64 per cent.

Please note: The above constitutes a preliminary view and any interest in stocks and cryptocurrencies should be evaluated further from an investment point of view. The reference data in this article has been partly sourced from TMX.



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