Will Big Six Canadian Banks Hike Dividends In Next Quarter?

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Canada’s federal financial regulator set restrictions on share buy backs and dividend payout last year due to the rising financial risk amid the COVID-19 outbreak. But now, the economy is in on the recovery path, and this ban could be uplifted in the upcoming quarter.

The fiscal regulator stated towards the end of 2020 that the restrictions will be relaxed when there’s no pandemic-caused setback in the economy.

Canada’s big six banks may get a leeway to increase the quarterly dividend as curbs loosen.

From increasing dividends to buying back shares, big six can pass on last quarter profits to their shareholders. However, the monetary regulatory body wants creditors to have enough capital to survive in case of another COVID-triggered economic downturn.

The big six includes Royal Bank of Canada (TSX:RY), Toronto Dominion Bank (TSX:TD), National Bank of Canada (TSX:NA), Bank of Montreal (TSX:BMO), Canadian Imperial Bank of Commerce (TSX:CM), and Scotiabank (TSX:BNS).

Across the Canadian border, large American banks had sufficient money reserves and the US Federal Reserve will allow them to increase dividend by the end of June.

The Bank of Canada should take a cue from the Feds and revoke existing restrictions from financial institutions.

Let us take a glance at ‘Big Six’ dividend yield and price performances:

• Stocks of Royal Bank of Canada (TSX: RY) advanced 11 per cent year-to-date (YTD). Its dividend yield is 3.715 per cent. Its one-year return is up 36.60 per cent.
• Toronto Dominion Bank (TSX: TD) stocks has returned 14 per cent this year. The current dividend yield is 3.848 per cent. The lender stock is up 37.7 per cent in the past one year.
• National Bank of Canada (TSX: NA) stock has soared as much as 21.60 per cent in 2021 and offers a dividend yield of 3.258 per cent. It is up by 69.50 per cent in one year.
• Bank of Montreal’s (TSX: BMO) share price has increased by 16 per cent YTD. The blue-chip share has gained around 61 per cent in one year and its dividend yield stands at 3.778 per cent.
• Canadian Imperial Bank of Commerce (TSX: CM) has improved by 16.50 per cent this year and surpassing its peers with a dividend yield of 4.609 per cent of dividend yield. It has grown by 52.21 per cent in one year.
• Scotiabank (TSX: BNS) stock is also marching in line with the rest of the banks with a growth of 14.25 per cent this year and a one-year return of 37.31 per cent. It is delivering an interesting dividend yield of 4.58 per cent.

Image Source: Kalkine Group @2021

Stock Market Expectations From Big Six

All the above banks made double-digit profits in the first fiscal quarter of 2021.

Financial analysts are deliberating on how the Big Six could use this excess capital. Some claim, the lenders should announce share buyback programs, others are game for a rise in quarterly dividends.

These initiatives might help the share prices of these banks to grow in the upcoming quarters.