S.C. Joe said:
But if the stocks keep felling, those dividends get cut.
Citi-Bank cut theirs last week 41%.
Good news, my holdings went UP a 1/4 of a % today
Here I thought I was going to get hit 10% or more on the down side.
Thats why I am not a day trader.
It's always possible that a Canadian bank would get into such dire straits that they'd be forced to cut their dividends but the odds are much less here than they are in the US. We've been through our share of market crashes and recessions but in recent memory, the only Cdn band that has cut its dividend was the National Bank. So none of the big boys have done it. I'll take those odds.
http://ctv2.theglobeandmail.com/ser...k17/business/Business/businessBN/ctv-business
..."Almost everyone in Canada owns bank stocks in one way or another, be it directly, through mutual funds or pension funds. The attraction: good share price gains over the years, but also a flow of dividends that has reliably risen over the years. When you consider the low tax rate on dividends, bank stocks have been one of the best ways around to generate income.
They still are, despite the current carnage in the stock markets and the financial sector in particular. Bank dividends have been cut before and they could be again, but the overall chances of this happening are low. For those who can tolerate bank stocks looking even worse in the days ahead, they may even be a buy right now.
Bill Procter, who manages a few billion dollars in dividend stocks for Mackenzie Financial's Maxxum family, says it's only normal that people would wonder about the dividends paid by Canadian banks. On Tuesday, Citigroup slashed its dividend 41 per cent while announcing a stunning $18-billion (U.S.) writedown as a result of bad mortgages and consumer loans. Washington Mutual, the biggest savings and loan in the United States, announced a 73-per-cent cut in its dividend late last year.
Mr. Procter said Canadian banks benefit from a much stronger housing market than in the United States, and a much lower default rate on mortgages. And what about Canadian bank dividends? "They're pretty low on the risk screen," he said. "It's a totally different situation here than in the United States."
And yet, Canadian bank stocks are experiencing their worst decline in roughly 10 years. Partly, this is because of negative sentiment toward financial stocks that has permeated the markets since the summer, when the rot in the U.S. subprime mortgage became apparent. But Canadian banks have some responsibility for their current problems, too.
Canadian Imperial Bank of Commerce is taking a writedown of about $3.4-billion for its exposure to U.S. subprime loans, and it's shoring up its financial stability by selling $2.75-billion (Canadian) in new stock. Bank of Montreal has had big losses in commodity trading, while National Bank of Canada has been hit through its exposure to asset-backed commercial paper. That's a way of packaging consumer debt that has fallen into disrepute because of concern about the taint from bad U.S. mortgages.
If you want to assess the level of risk in a bank stock, check its dividend yield. BMO, National Bank and CIBC have had yields in the area of 5 per cent in recent days, which compares with a more typical range in the high 2- or low 3-per-cent range. Bank of Nova Scotia, Royal Bank of Canada and Toronto-Dominion Bank have seen their yields rise, too, but by lesser amounts that suggest investors aren't as worried about them.
High yields suggest there's concern about a dividend cut, which is a defensive measure that U.S. banks use more often than Canadian banks. Michael Goldberg, bank analyst for Desjardins Securities, said he could find only two modern instances of banks cutting their dividend and both involve National Bank (one in 1981, one in 1992)."
