Pandemic Response

Canadian Bank Dividends:

Income Importance During and Beyond the Pandemic

James K. Stewart, Executive in Residence, Global Risk Institute

Jacqueline Beaurivage


Introduction

As Canada’s economy emerges in phased and uneven fashion from its historic economic contraction in 1H2020, sustaining household income is of paramount importance in limiting the impacts of the deep recession and in fostering the recovery. In these extraordinary times, Canadian bank dividends have had and will continue to have an increasing role in supporting consumer liquidity and spending, and thus demand overall in Canada.

This article explores the benefits of Canadian bank dividends, beginning with two areas that are often too little recognized. The first is the significance of Canadian bank dividends to sustaining household cash flow and liquidity, including their rising share of retail investor incomes, attractive absolute and relative yields, and dependability. The second is the crucial role of bank dividends in seniors’ incomes, including the structural trends boosting their importance in funding retirees’ spending needs. The article concludes with a brief examination supporting the dividend dependability of the Canada's six largest banks (the "big six”), underscoring that while they are not “recession-proof”, they are highly “recession-resistant”

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