These 2 Banks Just Raised Their Dividends

National Bank of Canada (TSX:NA) and Laurentian Bank of Canada (TSX:LB) raised their dividends this week, continuing their quests to maximize shareholder returns. Which should you own?

| More on:
The Motley Fool

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Dividend investing is one of the best ways to beat the market and build wealth over the long term, and this investment strategy generates the highest returns when you own stocks that raise their payouts every year. Taking this into account, let’s take a look at two big banks that raised their dividends this week and have active streaks of annual dividend increases, so you can determine if you should invest in one of them today.

1. National Bank of Canada

National Bank of Canada (TSX:NA) is Canada’s sixth-largest bank with approximately $220.7 billion in total assets.

In its second-quarter earnings report on June 1, it announced a 1.9% increase to its quarterly dividend to $0.55 per share, or $2.20 per share annually, and this gives its stock a yield of about 5% at today’s levels.

Investors must also make two notes.

First, National Bank’s three dividend hikes since the start of 2015, including its 4% hike in May 2015, its 3.9% hike in December 2015, and the one noted above, have it on pace for 2016 to mark the sixth consecutive year in which it has raised its annual dividend payment.

Second, the company has a target dividend-payout range of 40-50% of its adjusted net earnings, so I think its consistent growth, including its 4.9% year-over-year increase to $4.70 per share in fiscal 2015 and its 0.4% year-over-year increase to $2.31 per share in the first half of fiscal 2016, will allow its streak of annual dividend increases to continue for many years into the future.

2. Laurentian Bank of Canada

Laurentian Bank of Canada (TSX:LB) is one of the largest banks in eastern Canada with over $41 billion in total assets.

In its second-quarter earnings report on June 1, it announced a 3.5% increase to its quarterly dividend to $0.60 per share, or $2.40 per share annually, and this gives its stock a yield of about 4.6% at today’s levels.

Investors must also make two notes.

First, Laurentian’s three dividend hikes since the start of 2015, including its 3.7% hike in June 2015, its 3.6% hike in December 2015, and the one noted above, have it on pace for 2016 to mark the ninth consecutive year in which it has raised its annual dividend payment.

Second, the company has kept its dividend payout ratio close to 40% of its adjusted net earnings over the last several years, so I think its strong growth, including its 5.8% year-over-year increase to $5.62 per share in fiscal 2015 and its 6.3% year-over-year increase to $2.86 per share in the first half of fiscal 2016, will allow its streak of annual dividend increases to continue for the foreseeable future.

Just Released! 5 Stocks Under $50 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $50 a share.

Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.

Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

A plant grows from coins.
Dividend Stocks

Where I’d Invest in Canadian Value Stocks for Long-Term Compounding

When markets plunge, Warren Buffett's wisdom shines: Get greedy when others are fearful. Canadian value stocks like Scotiabank await patient…

Read more »

analyze data
Dividend Stocks

How I’d Invest $28,000 in Canadian Natural Resource Stock to Amass Personal Wealth

Investing in TSX dividend stocks such as Enbridge can help you earn a passive-income stream in 2025.

Read more »

hand stacks coins
Dividend Stocks

Got $400? How I’d Start Building Income With 3 High-Yield Stocks for the Long Term

These high-yield dividend stocks have a solid payout history, making them compelling investments to generate passive income.

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

I’d Put $15,000 in These 3 Dividend-Growth Champions for Increasing Income Potential

Want to offset some volatility? Here are three defensive dividend-growth champions that can generate a juicy yield right now.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Transform Your TFSA Into a Cash-Creating Machine With $7,000

Discover how the Tax-Free Savings Account can be your golden goose for generating cash without losing your investment.

Read more »

monthly desk calendar
Dividend Stocks

How I’d Invest $10,000 in Canadian Value Stocks for Monthly Dividend Income

A $10,000-diversified portfolio of value stocks focusing on dividend safety, yield, growth, and payment schedules can provide a reliable source…

Read more »

a person watches a downward arrow crash through the floor
Dividend Stocks

Is This Correction Your Chance? Top 4 Canadian Dividend Stocks on Sale

Stocks may be down, but now is your chance to get some of these top dividend stocks on sale.

Read more »

Confused person shrugging
Dividend Stocks

Where to Invest $2,500 in the TSX Today

These TSX stocks offer attractive dividends and a shot at decent upside on a rebound.

Read more »