The big Canadian banks and other financials finally got the go-ahead from OSFI. They are now allowed to increase dividends and buy back shares. Those are two major moves that return value to shareholders. Of course, paying down debt and investing in future growth projects are in the mix when companies have free cashflow. The banks are likely to be very generous for several quarters with their dividend growth. In the name of financial health (and financial fortress) they’ve been forced to suspend dividend hikes during the pandemic. And now they get the green light. The big Canadian banks are looking to pay you more on the Sunday Reads.
Given that I was on the zoom call for the OSFI announcement (yes I need to get a life) my Cut The Crap twitter feed was first with the scoop. I think they call that a ‘breaking story’ …
The dividend growth picture
You might be wondering how much of a raise might be on the way. Here’s a good post on DGI&R that frames the dividend growth picture for 11 Canadian companies.
And here is a table that details RBC’s recent dividend growth history.
Given the the dividends have been on hold for several quarters there is a lot of pent of dividend energy. In my recent Making Sense of the Markets post for MoneySense I looked the potential for dividend increases for the Canadian banks. From that post …
“To restore typical levels of shareholder payouts, he estimates dividends would need to increase 38% at National Bank and 32% at BMO.”
You’ll see National Bank potentially leading the way, followed by BMO. RBC and TD are also looking very generous. Check out that MoneySense post. This week I also touched on the incredible earnings season for the oil and gas producers. When it comes to dividend increases they told the big banks to “hold my beer”. We see 25%, 50%, 100% increases. Also covered in the post – Amazon gets in on the electric vehicle market and 5 unstoppable investment trends – from Jim Cramer of Mad Money.
Insurers out first with big paydays
From Seeking Alpha …
Combining this supplementary dividend and the quarterly dividend of $0.55 per share declared on November 3, 2021, Sun Life shareholders will receive a total quarterly common shareholder dividend of $0.66 per share or a 20% increase from the prior quarterly dividend payment.
And from Manulife …
Manulife Financial declares supplemental dividend of C$0.05/share. Combined with its quarterly common shareholders’ dividend of C$0.28 per share announced on November 3, 2021, this supplementary dividend results in a total quarterly common shareholders dividend of $0.33 per share or an 18% increase.
Beat the bank
If you own a bank-offered high-fee Canadian mutual fund, the banks will essentially give with one hand and take back with the other. They’ll pocket those dividends for you, thanks to fees that are of the highest on the planet.
This is a good time to remind you to ‘Beat The Bank’ as Larry Bates offered in that best-selling book. That is a must read.
Don’t Give Away Half of Your Investments – Beat The Bank.
You want to own the banks as an investor, you don’t want to (mostly) own their mutual funds or pay them fees when you do your everyday banking. Make every effort to pay them nothing and but profit generously from their activities.
My wife and I pay no ongoing monthly bank fees. And we make money every month on our everyday spending thanks to our Tangerine Cashback Credit Card. In October we made …
You might even consider Tangerine as your everyday bank. They are Canada’s leading online bank.
If you’re investing you likely own the banks
You don’t have to own the individual stocks. The big Canadian banks and other financials dominate the Canadian stock market indices. You’ll have healthy exposure if you build your own ETF portfolio. It’s the same deal if you hold the all-in-one TD One Click ETFs, or the BMO asset allocation ETFs. You’re keeping your fees low, you’re keeping most of those dividends and capital gains in your pocket – where they belong.
My wife has significant exposure to the financial thanks to the Vanguard High Dividend Yield ETF, ticker VDY. Here’s an updated post on Vanguard’s VDY vs iShares XEI.
And many Canadians do hold the bank stocks when they build their own stock portfolio. I am in that camp and will welcome the greater income to spend or invest.
The big idea is to leave your high-fee funds. More Canadians need to get that message. While ETFs already set a record for annual sales, there’s still too much money going into crap mutual funds.
I checked out most of IGM’s balanced funds against similar ETF options – not even close. Investors are giving up massive returns by opting for the high-fee mutual fund route.
Spread the word friends, there are so many simple and cost-effective investment options. Here is the MoneySense Canadian Couch Potato Portfolio Guide for 2021.
The Sunday Reads
Nothing gets more digital ink than inflation and the energy story these days. John Mauldin frames it all quite simply in energy complexity. Mauldin offers …
Shifting some of your resources to clean energy isn’t the same as abandoning fossil fuels, which are and will remain necessary for some time. Punishing producers and users of a critical resource for which adequate alternative supplies aren’t yet available is counterproductive.
And nuclear will be needed for the transition …
I’m a big nuclear energy proponent. I’m convinced it is the best way we have to produce clean, reliable, round-the-clock electricity regardless of weather conditions. I certainly don’t want more Chernobyl or Fukushima disasters. New designs that don’t depend on externally powered water cooling systems eliminate much of that risk. Other technologies like thorium reactors and nuclear fusion are coming. Nuclear is the perfect bridge to move us from carbon to a world of clean, sustainable, abundant energy.
You’ll see from that post that smaller scale nuclear reactors have come down in cost and are now competitive. We need clean power for when the sun don’t shine and the winds are still. That is another great post from John Mauldin.
There’s more on the Canadian dividends, my home bias post, reflections of an early retiree and Mike The Dividend Guy’s favourite stock on the weekend reads at My Own Advisor.
On Passive Canadian Income, Rob offers the best report ever.
On getting started, from stocktrades.ca, how to buy stocks in Canada, the ultimate guide.
And more on the income front, Bob at Tawcan asks – Should I invest in covered call ETFs?
Wealth and Happiness
On the Findependence Hub, Wealth and Happiness Part 1: the importance of managing and using your money wisely – from Warren MacKenzie.
On MoneySense, Tamar Satov breaks down the tax brackets in Canada. That includes a look at Provincial rates as well.
Here’s a very useful post that was recently refreshed, looking at sequence of returns risk on Million Dollar Journey.
A book review. There’s nothing more important that our investor behaviour, have a read of the psychology of money on Banker on Wheels.
And south of the border there’s always a host of great reads on A Wealth of Common Sense. That includes the 3 levels of FOMO. FOMO – the fear of missing out.
Thanks for reading. We’ll see you in the comment section.
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Consider Justwealth for RESP accounts. That is THE option in Canada.
Make your cash work a lot harder at EQ Bank. RRSP and TFSA account savings rates are at 1.25%. You’ll find some higher rates on certain GICs. They now also offer U.S. dollar accounts.
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Dale
Hi Dale, EQ Bank seems to have great rates but not if you are from Quebec.
J.
Hi James, EQ is not available in Quebec. Check with Mike The Dividend Guy on options in Quebec, perhaps.
Dale