The Globe and Mail reports in its Saturday edition that growing cash piles at Canada's big banks are raising expectations for substantial dividend increases when regulators give banks the go-ahead.
The Globe's David Berman writes that an early indication from Royal Bank of Canada suggests the boost could be big -- as in, nearly 30 per cent. The Big Six have maintained their quarterly payouts during the pandemic, but have not been able to raise them after the banking regulator imposed restrictions in March, 2020, in the early days of the COVID-19 pandemic.
The cautious approach over the past year has left the banks holding enormous amounts of excess capital.
RBC has been paying a quarterly dividend of $1.08 a share, or $4.32 annually, throughout the pandemic. Analysts estimate, on average, that RBC will generate a profit of $11.20 a share in 2021. Comparing the current distribution with the estimated profit means today's payout ratio is less than 40 per cent.
If RBC boosted the distribution to the top end of its payout ratio -- or 50 per cent -- the annualized distribution would rise to $5.60 a share. That implies an increase of $1.28 a share, or nearly a 30-per-cent boost to the current dividend.
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