Canada’s Big Banks: Stocks Earnings Preview

All of five Canada’s big bank stocks are scheduled to report results this coming week. They will be closely watched for signs of economic stress.

We are finally in bank earnings season. When Canada’s big bank stocks report earnings this quarter, the Canadian investing landscape will come to a standstill. Much like the 2008 Financial Crisis, investors will be watching closely and dissecting every word. 

This week, all five of Canada’s big bank stocks report earnings. Here is the schedule:

Tuesday, May 26

  • Bank of Nova Scotia

Wednesday, May 27

  • Bank of Montreal
  • Royal Bank of Canada

Thursday, May 28

  • Canadian Imperial Bank of Commerce
  • Toronto-Dominion Bank

Economic bellwethers

Why are Canada’s big bank quarterly results so important? For one, they are largely considered economic bellwethers. That is, strong earnings are typically a sign of a strong economy. The flip side is also true — poor earnings and a dire outlook could mean a recession. 

The financial sector accounts for approximately 33% of the S&P/TSX Composite Index. Likewise, Canada’s big banks account for a good portion of the sector. In other words, they have significant influence over the Index. If Canada’s bank stocks crash, there is a strong likelihood it is taking a good portion of the S&P/TSX Index along with it. 

Are dividends at risk?

Canada’s big banks form the cornerstone of individual retirement portfolios across the country. They are also the bedrock of large pension funds, all of which rely on the companies for reliable income. 

Without question, they are largely considered the safest dividend stocks on the planet. They escaped the Financial Crisis without cutting dividends, and they have paid out uninterrupted dividends for more than a 100 years. Quite simply, they deserve to be recognized for their impressive dividend history. 

Unfortunately, companies are cutting the dividend at a record pace. Thus far, there have been over 70 TSX-listed companies that have either cut or suspended dividends. In Europe, governments are mandating dividend cuts. 

Although it is unlikely Canada’s Feds will follow suit, they have asked banks not to raise dividends. This will impact Bank of Montreal shareholders, as it would typically announce the bi-annual raise this quarter. Much like they did in the Financial Crisis, Canada’s big banks are likely to escape this pandemic with dividends intact. 

However, dividend-growth investors need to keep their expectations in check. Give the situation, it is likely that dividend raises will be on pause for foreseeable future. The impact of COVID-19 measures on the economy won’t be known for some time. What we do know is that provision for credit losses will skyrocket this quarter. 

This will eat into earnings and inflate payout ratios. 

Canada’s big banks are a buy

Are Canada’s big banks a buy today? The banks are trading at levels not seen since the Financial Crisis. Just as they rebounded then, so too will they rebound in the future. 

If you are looking for a quick buck, then I’d recommend staying away. The financial industry has a ways to go before it is on solid economic footing. However, Canada’s big banks are some of the best capitalized banks in the world. This will enable them to weather the storm and come out strong on the other side. 

I am not a fan of timing the market. In my opinion, Canada’s big banks can be bought at any time. However, they look particularly attractive today. Worried about earnings? Perhaps buying a partial position before earnings and topping up afterwards is the best course of action. 

Regardless, many years from now, investors will be looking back at today’s prices as a once-in-a-decade opportunity. Don’t miss out.

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 Mat Litalien owns shares of BANK OF MONTREAL and TORONTO-DOMINION BANK. The Motley Fool recommends BANK OF NOVA SCOTIA.

More on Dividend Stocks

profit rises over time
Dividend Stocks

These 2 Dow Stocks Are Set to Soar in 2025 and Beyond

Two Dow Jones stocks are screaming buys but Canadians must hold them in an RRSP or RRIF to avoid paying…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Use Your TFSA to Earn Ultimate Passive Income

If you have a TFSA, then you have the key to creating ultimate passive income. All you need is a…

Read more »

Confused person shrugging
Dividend Stocks

Better Buy: Fortis Stock or Hydro One Stock?

Let's do a compare and contrast of these two top utilities stocks right now, shall we?

Read more »

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

Boost Your Passive Income: 2 Canadian High-Yielders at a Bargain

Nutrien (TSX:NTR) stock and another play that appear like fantastic dividend bargains in mid-November.

Read more »

3 colorful arrows racing straight up on a black background.
Dividend Stocks

TSX Stocks Soaring Higher With No Signs of Slowing

Three TSX stocks continue to beat the market and could soar higher in an improving investment landscape.

Read more »

Hourglass and stock price chart
Dividend Stocks

Goeasy Stock: Is It Heading for a 52-Week High?

Goeasy stock has been edging higher, especially after another record-setting earnings report. So are 52-week highs in sight?

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

Here’s the Average TFSA Balance at Age 44 in Canada

You can invest your TFSA in funds like the BMO Canadian High Yield Dividend ETF (TSX:ZDV) to grow the balance.

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

The Best Telecom Stock to Buy Before 2025

Choosing the safest stock from a decimated sector can be tricky, but if there is a reasonable chance of full…

Read more »