In 2023, dividends are on the rise. Last month, almost all of the big U.S. banks announced that they would be hiking their dividends in the upcoming quarter. Canadian companies also announced similar moves. In this article, I will explore three stalwart Canadian stocks that are raising their dividends.
Fortis
Fortis (TSX:FTS) is a Canadian utility company whose stock has a 4% dividend yield. The company last announced a dividend hike in September of 2022. It is very likely to announce another dividend hike this coming September.
Why am I so confident in saying that another hike is likely coming?
Because Fortis’s dividend track record has been remarkably consistent. Over the last 49 years, FTS has not only paid but actually raised its dividend every single year. If it bags one more dividend increase, it will acquire the title of “Dividend King” — a stock that has raised its dividend for 50 years straight. That’s a very rare distinction, and it seems unlikely that Fortis’s management would want to pass it up.
Second, Fortis has the performance to justify a dividend hike. In the last 12 months, it has grown its revenue, earnings, and operating cash flows at the following rates:
- Revenue: 18.3%
- Earnings per share (EPS): 13.5%
- Operating cash flow: 6.5%
These growth rates are all well ahead of the 6% dividend hike that Fortis has planned, so, most likely, a September hike will be delivered.
TD Bank
Toronto-Dominion Bank (TSX:TD) is a Canadian bank stock that last raised its dividend earlier this year from $0.89 to $0.96. The 7.8% hike was among the largest seen from Canadian big banks this year.
Was TD Bank’s performance good enough to justify the hike?
On the whole, I would say, yes, it was. Last quarter, TD’s revenue grew 12%, which is greater than the amount by which the dividend grew. Earnings declined slightly, but that was due to a rise in provisions for credit losses (PCLs), not poor operating performance.
Banks raise their PCLs when the economy or their business is perceived as being riskier than before. When the PCLs are raised, earnings decline, but if the expected increase in defaults doesn’t occur, then the PCLs can be lowered later, causing earnings to spike. Certainly, there are risks facing banks today, such as a stretched consumer and an inverted yield curve, but on the whole, TD should manage things well.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS), better known as Scotiabank, is another Canadian bank that raised its dividend this year. In its May 2023 earnings release, it announced that it would be hiking its dividend 3% to $1.06.
In general, I’m less enthusiastic about Scotiabank’s dividend hike than I am about TD’s. In the earnings release in which BNS’s hike was announced, the company’s revenue declined 0.1%, and its earnings declined by about 20%. Unlike TD’s earnings decline, Scotiabank’s was accompanied by weaker revenue. I wouldn’t take BNS’s latest earnings release as a positive, but its stock now has a monster 6.6% yield.
