Not too long ago when you wanted a safe investment you could invest your money into bank stocks and sleep fairly well at night. In the past year or so things have changed. Big banks around the world were and some still are on the edge of bankruptcy. Amongst the ashes Canadian banks arose looking strong and stable.
The chart below lists the write down the major global banks took in 2009. The top four all all Canadian banks. A couple more like Royal Bank of Canada and CIBC are also listed a but further down.
Many people may think the Canadian banks are too conservative and take small risks. Those people would be correct. Profits for the big 5 Canadian Banks (TD, RBC, CIBC, BMO and Scotiabank) are smaller than what you would expect from most majors banks mostly because their exposure to risk is much less. This great ability to manage risk is done in a country that does not have a required reserve ratio on deposits. Kinda strange since the US banks have a 10% reserve ratio and nearly collapsed a year ago.
If not for the stock price and security alone you may want to look at the Big 5 dividend history.
Here are some excerpts from a few of the sites regarding their dividend history.
Scotiabank’s practice has been to relate dividends to the trend earnings, while ensuring that capital levels are sufficient for both growth and depositor protection. This practice, coupled with the Bank’s strong earnings growth, has led to dividend increases in 37 of the last 39 years – one of the most consistent records for dividend growth among major Canadian corporations.
Dividends are generally increased in line with long-term trends in earnings per share growth, while sufficient profits are retained to support anticipated business growth, fund strategic investments and provide continued support for depositors. BMO’s policy is to maintain a dividend payout ratio of 45% to 55%, over time.
CIBC has not missed a regular dividend since its first dividend payment in 1868.
To honor this post I present the great Canadian Silver Maple Leaf 1 oz coin.
