The big banks differ in all kinds of ways, but one area of similarity is their dividend growth patterns over the past five years.
A clear example of how the banks differ is their share price performance over the past five years. But the independent research firm IncomeResearch.ca reports that average annual dividend growth from 2016 through 2020 will be in a narrow band between 5.8 per cent and 7 per cent. Growth for 2020 is based on estimates.
Toronto-Dominion Bank is projected to have an average five-year dividend growth rate of 7 per cent, while Royal Bank of Canada is pegged at 6.2 per cent, Canadian Imperial Bank of Commerce at 6.1 per cent, National Bank of Canada at 6 per cent and both Bank of Nova Scotia and Bank of Montreal at 5.8 per cent.
There’s a lesson in these numbers for investors who put a priority on dividend income from their dividend stocks. Choosing the right bank makes a significant difference for stock performance, but not as much for dividend growth. According to GlobeInvestor.com, National Bank’s shares were up 50.3 per cent in total over the five years to mid-December, TD rose 35.7 per cent, RBC was up 31 per cent, BMO 25.5 per cent, Scotiabank 14.7 per cent and CIBC 10.5 per cent.
If you’re tracking big bank dividend growth year by year, you’ll very likely get the sense that the banks are increasing dividends at different rates. IncomeResearch.ca reports that fiscal 2019 dividend growth ranged from 10.7 per cent at TD to 5.3 per cent at CIBC. But growth rates even out if you look back a few years. Back in 2016, CIBC boosted its dividend by 10.5 per cent, while TD was around 2 per cent.
IncomeResearch.ca forecasts average dividend growth for the Big Six in 2020 of between 2.3 per cent and 3.2 per cent, a reflection of lower projected earnings growth. Noting it’s still early in the fiscal year, IncomeResearch said more dividend increases are still possible.