Canadian Banks: Time-Tested Pillars of Financial Stability and Growth

 

Introduction: Last week we had earnings from the Canadian banks. Many in the industry forecasted dividend pauses - even dividend cuts. Yikes!

But here’s the deal  - amid  global economic challenges, Canadian banks have stood as pillars of strength. Their impressive history of consistent revenue growth and dividend increases since the 1800s has been a source of confidence for investors.

A Storied Legacy of Stability The Big Six Canadian banks have demonstrated resilience and growth, becoming synonymous with financial stability over the centuries. Ya  you heard me right  -not just years centuries!

The Lindy Effect and Longevity The Lindy Effect says that the future life expectancy of non-perishable entities like Canadian banks is directly proportional to their current age. Given their centuries-long existence, these banks are anticipated to maintain their robustness and success well into the future. Basically, the longer something has happened, the more likely it is to continue. Because the banks have been paying divies since the 1800s, they are more likely to continue doing so than not. No guarantees in life mind you - mt dad says the only two things guaranteed in life are death and taxes but you get the idea. 

Recent Earnings and Dividend Surprises

So here’s how it went down…..

1. Royal Bank of Canada (RY): Posted a net income of $14.9 billion for 2023, a testament to its enduring strength, with dividend raises surprising many analysts​​.
2. Toronto-Dominion Bank (TD): Reported a robust net income of $10.782 billion for 2023, their dividend increase underscoring a forward-looking confidence​​.
3. Bank of Nova Scotia (Scotiabank): Achieved a net income of $7,528 million in 2023, still impressive  despite economic headwinds​​.
4. Bank of Montreal (BMO): Recorded a net income of $4.377 billion in 2023, surprising analysts with its dividend increase, signaling strong future prospects​​.
5. Canadian Imperial Bank of Commerce (CIBC): Showed resilience with a $6.5 billion net income in 2023, their dividend hike being a bold statement of confidence​​.
6. National Bank of Canada: Reported a steady net income of $3,335 million in 2023, raising its dividend in a move that was well-received by the market​​.

Investing in Canadian Banks These banks not only offer stability but also reflect a confidence in their future growth, making them attractive investments for those seeking long-term value and reliable dividends.The Boards of Directors of these banks know that there is likely going to be trouble with many whose mortgages renew at higher rates. They have likely set aside cash to deal with this - do I know this for sure? No. But because they mostly all voted to increase dividends, they likely have another pile of cash to deal with future mortgage problems. Dividend raises are a vote of confidence in FUTURE ability to do business. 

Conclusion: The recent performance of Canadian banks, especially their dividend increases, speaks volumes about their confidence and stability, making them a compelling choice for any investment portfolio.

Disclosure: As Dividend John, I hold positions in all six Canadian banks. My analysis is based on their performance and potential in the current market.

This blog blends historical insights with recent financial data to highlight the soundness of investing in Canadian banks, particularly their confident dividend strategies in uncertain times. Please do consult a professional before making investment choices. I’m not a licensed broker nor financial advisor. Any investment involves risk. The past does not guarantee future performance. 

If you like what I’ve shared above you’ll really enjoy my book Too Rich to be Stressed: Freedom from Dividend with Dividend Investing Too Rich to be Stressed: Freedom with Dividend Investing

Or my new book for kids and teens Playbook for Young Investors: How to Build Wealth with Dividend Secrets Playbook for Young Investors: How To Build Wealth With Dividend Secrets