Are Canadian bank dividends sustainable?

Mar 26, 2020 | Dan Rudisuela


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We’ve seen the value of bank stocks drop significantly which has many wondering whether or not dividends are at risk.

I am sharing this article from our Portfolio Advisory Group as it speaks to a topic that has been coming up a lot in recent conversations. Cash flow is an important focus in many investment accounts and Canadian banks have long been a favourite choice for generating income with their healthy, reliable dividend payments.

Here are the 3 key themes that would lead us to believe that, though a pause in distribution of dividends always is a possibility, banks are seemingly in a position to manage the current reality without cutting dividends:

  • The Big Six Canadian banks have policies in place to maintain steady dividend payments through short-term volatility in earnings
  • Rules were changed after the Great Financial Crisis and banks now have a much stronger capital buffer in place to weather economic shocks than they did in 2008
  • History has shown that cutting dividends is the absolute last resort and would mean the long-term outlook for the Canadian economy was very grim. The impact of the virus is expected to be transitory.

As we continue through period where the markets appear to be unsure of how to price so much of this new information and risk all at once one of our focuses has been to gauge and test the feasibility of dividends of the companies we own moving forward.

I can be reached directly here for (socially distant) one-on-one discussions on your specific situation. Stay safe!