Economic IndicatorsTop News

Canada’s banks to cement status as solid investments in a crisis

imageEconomic Indicators12 hours ago (May 25, 2020 12:40PM ET)

(C) Reuters. FILE PHOTO: A man walks in front of buildings in the financial district in Toronto

By Noor Zainab Hussain and Nichola Saminather

(Reuters) – Canadian banks, whose dividends yields climbed during the financial crisis, are again gaining favor with investors, as their pledges to maintain payouts gives them an edge over global counterparts who have shunned them.

Canadian banks are currently offering dividend yields of 5.7% versus U.S. banks’ 4.2% and European lenders’ 1.7%, according to Datastream.

(GRAPHIC: Canada bank yields outstrip European, American rivals –

Dividends are seen as evidence of good financial health and encourage loyalty from investors, particularly in the current low-yield environment.

Canadian lenders have seen the smallest declines in share prices versus peers in Europe and the United States in the past three months.

(GRAPHIC: Canadian bank shares higher than international rivals –

“Globally, there continues to be a pursuit for yield … and there are simply not many places where you can get yield anymore,” said Kash Pashootan, Chief Executive Officer of First Avenue Investment Counsel.

“That has forced investors into the dividend-generating equity realm … Canadian banks are a natural beneficiary of that,” he added.

(GRAPHIC: Banks’ dividend yield –


In contrast, top UK banks axed 2019 dividend payments after pressure from the regulator and are likely to review their plans for 2020.

Banks across the euro zone are also tearing up plans to return cash to shareholders.

In the United States, authorities have pushed for banks to preserve capital.

Bank of America (NYSE:BAC) Securities analyst Ebrahim Poonawala pointed out that Canadian banks were one of the few developed market lenders to not cut dividends in 2008.

This was in part because of stronger balance sheets and capital levels, helped by conservative regulatory limits.

(GRAPHIC: Canadian banks’ dividend –

Sprung Investment Management President Michael Sprung, however, argues that despite the higher payouts, the negative impact of exchange rates and the hit to the country’s resources industry will keep demand from foreign investors in check.

(GRAPHIC: Canadian banks’ return on equity –

Canada’s banks to cement status as solid investments in a crisis

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Related Articles

Back to top button
Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.
Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!