Are Canadian Bank Dividends Sustainable?

 

As we continue in this period of tempered economic growth and uncertainty on the back of the COVID-19 crisis and an oil price war, we think it is important to take a closer look at the Canadian banks, particularly the sustainability of their dividends. 

Investors have sold off the bank group in a very aggressive fashion during the crisis, with the TSX/S&P Commercial Banks Index down approximately 30% from its February high. Low interest rates, slowing economic activity, the collapse in energy prices, and credit concerns are all top of mind and driving investor concern around dividend sustainability. While nothing is ever certain, especially in such uncertain times, below we look at key factors investors should consider when assessing the dividend outlook for the Canadian banks.

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