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Canadian Bank Dividend Raises – Strong 2021 Gains

Canada is best known for a few simple things. From maple syrup to our general friendliness, the Red Maple Leaf is well-known, the world over. My personal favourite hallmark of Canada is the strength of our financial sector. This has been demonstrated by the recent Canadian Bank dividend raises.

Our banks are known for being well-capitalized, conservative, and incredibly profitable. During the pandemic, however, the Office of the Superintendent of Financial Institutions (OSFI) temporarily barred our financial service businesses from the following activities:

  1. Raising dividends.
  2. Buying back stock.
  3. Increasing executive compensation.

The purpose of these restrictions was to ensure these systemically-important companies would remain healthy, no matter the depth of the downturn.

OSFI lifted its restrictions last month, opening the door for shareholders to be compensated.

Big Five Canadian Bank Dividend Raises

The week of November 29-December 3 was earnings week for the Canadian Banks. Each of the Big Five increased their payouts by double-digits.

Canadian Bank dividend raises grow a portfolio

The dividend increases were huge:

  • Royal Bank (RY) – 11.11%
  • Toronto-Dominion Bank (TD) – 12.66%
  • Bank of Nova Scotia (BNS) – 11.11%
  • Bank of Montreal (BMO) – 25.47%
  • Canadian Imperial Bank of Commerce (CIBC) 10.27%

These average out to 14.12% in dividend raises. These are, in most cases, an accumulation of pent-up dividend increases from the past two years.

The Importance of These Canadian Bank Dividend Raises

The simple fact is that dividends send signals. The old saying is that the safest dividend is the one that has just been raised. In the case of the Canadian banks, the dividends were catapulted.

The policy set by companies reflects their overall outlook on their business prospects and economic outlook. No company wants to raise its dividend, only to turn around and have to cut it. That just looks bad.

Most companies that have a history of raising dividends want to continue on that path. It becomes a matter of institutional pride.

What we see here is yet another example of high-quality companies rewarding shareholders. It feels good to be on board for the ride.

Impact to My Portfolio

I own three of the Big Five—TD, BNS, and CM.

Accordingly, my forward dividend income is going to be seeing a nice increase as we head into 2022.

Here’s how I’ll specifically be impacted by the boosts:

  1. The TD increase will provide me an extra $20 quarterly, $80 annually.
  2. BNS’ bump will send me an additional $9 quarterly, $36 annually.
  3. CM, the smallest of my bank holdings, will provide $1.80 quarterly, $7.20 annually.

All of this comes together for $30.80 quarterly, $123.20 annually. This is the beauty of the dividend growth investing model.

I’ll earn over $100 in bonus income for doing… nothing. Just for holding stock in strong companies.

Plenty of people get upset thinking about how the rich get richer, but it doesn’t just have to be them. Every person has the opportunity to do the same.

And what will I do with this income? Simple. Reinvest it into top notch businesses and let them work hard to send me more cash.

That’s the secret to long-term wealth accumulation.

Concluding Thoughts

Dividend growth investing provides regular income that can be reinvested or spent. The Big Five Canadian Banks have lengthy track records of rewarding shareholders; dividends have been paid going all the way back to the 1800s.

The key has been to hold them over the long term. Trading in and out of stocks is a recipe for poor returns.

It’s best to stay the course. Even when a pandemic comes along and rattles our global financial system.

The proof is in the financial pudding.

Full Disclosure: Long TD, BNS, CM — Image courtesy of Pixabay


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