Wednesday, May 24, 2006

Banks Set to Raise Dividends

Financial Post, Duncan Mavin, 24 May 2006

The banks are at the starting line for another earnings season, and analysts are predicting further dividend hikes -- at least in some cases.

Bank of Nova Scotia, National Bank and Canadian Imperial Bank of Commerce are all set to increase their quarterly payouts, said RBC Capital Markets analyst Jamie Keating in a note to clients.

CIBC, he noted, could push its quarterly dividend up 2 cents a share to 78 cents, the first increase "since the Enron capital-rebuild began," a reference to the bank's efforts to slash costs to cope with a big legal bill from 2005.

Mr. Keating also forecast National Bank could hike its quarterly dividend 2 cents, to 50 cents. "This may look conservative given the bank's relatively low payout," said Mr. Keating, "though we do anticipate potential for an earnings per share slowdown may rein in board enthusiasm for a higher increase."

Both Mr. Keating and Genuity Capital Markets analyst Mario Mendonca foresee a dividend increase at Bank of Nova Scotia. The bank has "materially slowed" the level of share repurchasing to 1.9 million shares in the second quarter of 2006, compared to an average of 5 million shares since fiscal 2005. That introduces "the possibility of a slightly larger dividend increase," Mr. Mendonca said in a note. Mr. Mendonca is forecasting Scotiabank will increase its quarterly dividend by 15% to 39 cents from 36 cents in the first quarter of 2006.

Meanwhile, Bank of Montreal, which reports its results today, Royal Bank of Canada, and Toronto-Dominion Bank "are 'off-cycle' having just hiked last quarter," when it comes to dividends, said Mr. Keating.