2 of Canada’s 5 Largest Banks Just Raised Their Dividends

Royal Bank of Canada (TSX:RY)(NYSE:RY) and Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) just raised their dividends by 2-5%. Should you invest in one of them today?

| More on:
dividends

Two of Canada’s largest banks — Royal Bank of Canada (TSX:RY)(NYSE:RY) and Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) — just made very shareholder-friendly moves and raised their dividends. Let’s take a closer look at each dividend increase, so you can determine if you should invest in one of these banks today.

Royal Bank of Canada

RBC is Canada’s second-largest bank as measured by assets with approximately $1.2 trillion in total as of July 31.

In its third-quarter earnings release on August 23, RBC announced a 4.6% increase to its quarterly dividend to $0.91 per share, equal to $3.64 per share on an annualized basis, and this brings its yield up to about 3.9% at the time of this writing.

Investors must also make the following three notes.

First, the first payment at the increased rate will be made on or after November 24 to shareholders of record at the close of business on October 26.

Second, RBC has raised its annual dividend payment for six straight years, and its recent hikes, including its 4.8% hike in February and the one noted above, have it on track for 2017 to mark the seventh straight year with an increase.

Third, the company has a target dividend-payout range of 40-50% of its adjusted net income available to common shareholders, so I think its consistently strong growth, including its 10% year-over-year increase to $8.16 billion in the first nine months of 2017, will allow its streak of annual dividend increases to continue for the foreseeable future.

Canadian Imperial Bank of Commerce

CIBC is Canada’s fifth-largest bank as measured by assets with approximately $560.91 billion in total as of July 31.

In its third-quarter earnings release August 24, CIBC announced a 2.4% increase to its quarterly dividend to $1.30 per share, equal to $5.20 per share on an annualized basis, which brings its yield up to about 4.9% at the time of the writing.

It’s also important to make the following three notes.

First, the first quarterly installment at the increased rate is payable on October 27 to shareholders of record at the close of business on September 28.

Second, the company has raised its annual dividend payment for six consecutive years, and its recent hikes, including its 2.4% hike in February and the one noted above, have it on pace for 2017 to mark the seventh consecutive year with an increase.

Third, CIBC has a dividend-payout target of approximately 50% of its adjusted net income, so I think its very strong growth, including its 11.1% year-over-year increase to $3.4 billion in the first nine months of 2017, will allow its streak of annual dividend increases to continue for another seven years or more.

Which of these banks belongs in your portfolio?

I think RBC and CIBC would make great additions to any Foolish portfolio, so take a closer look at each and strongly consider making one of them a long-term core holding.

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 has no position in any of the stocks mentioned.

More on Bank Stocks

dividends can compound over time
Bank Stocks

Is TD Bank Stock a Buy for Its 5.2% Dividend Yield?

TD Bank stock offers a rare 5.2% dividend yield—can it rebound from challenges and reward contrarian investors? Here's what to…

Read more »

analyze data
Bank Stocks

Is BMO Stock a Buy for its 4.7% Dividend Yield?

Bank of Montreal is up 20% since late August. Are more gains on the way?

Read more »

calculate and analyze stock
Bank Stocks

4% Dividend Yield? I Keep Buying This Dividend Stock in Bulk!

If you find the perfect dividend stock, you never have to worry about investing again. And that's what you get…

Read more »

Investor reading the newspaper
Bank Stocks

Is Canadian Imperial Bank of Commerce Stock a Good Buy?

Let's dive into whether Canadian Imperial Bank of Commerce (TSX:CM) is a top buy, sell, or hold right now.

Read more »

Man data analyze
Bank Stocks

Where Will BNS Stock Be in 3 Years?

Bank of Nova Scotia is primed for growth with a bold U.S. expansion, steady dividends, and a value focus that…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Stocks for Beginners

TFSA 101: Earn $1,596.60 per Year Tax-Free!

Investors don't have to buy some risky stock if they want tax-free high income. Instead, buy this top stock instead.

Read more »

data analyze research
Bank Stocks

TD Bank: Buy, Hold, or Sell Now?

TD is underperforming its large Canadian peers this year. Is a rebound on the way?

Read more »

data analyze research
Bank Stocks

A Dividend Bank Stock I’d Buy Over TD Stock Right Now

TD stock has long been a strong dividend and growth provider. However, recent issues could cause investors to think twice.

Read more »