National Bank of Canada Raises Dividend 2% While Profits Fall 48%

National Bank of Canada Logo

On June 1st, National Bank of Canada (NA) raised their quarterly dividend 1.85% from $0.54 to $0.55. The dividend yield is now 4.91%, while I picked up my shares with a giant yield of 6.14% a couple of months ago. I’ve also made a 30% capital return on my investment. I’m now kicking myself for playing it so safe with a small up-front investment. It’s been one of my Top 3 performers. Not bad for the sixth largest Canadian bank.

The Dividend Beginner Portfolio

Considering the Dividend Beginner portfolio consists of 30 shares of NA, my annual income from NA has increased by $1.20 from $64.80 to $66.00 ($5.40 to $5.50 per month). My 12-month forward dividend income has risen from $2,087.66 to $2,088.86, an increase of 0.06%. My average monthly dividend income is now $173.97.

National Bank of Canada accounts for 3.14% of the Dividend Beginner’s portfolio. Considering I made such a small investment in it, although the yield was gigantic (especially for a bank), it only accounts for 3.14% of my total dividend income.

While a $1.20 increase in annual dividend income is laughable, think about how it would require an investment of $30.00, yielding 4.00% to generate $1.20 in dividend income. That’s the equivalent of getting one to three hours of your life back, depending on your wage.

Before Net Increase After
Annual Dividend Income $2,087.66 $1.20 $2,088.86
Monthly Dividend Income $173.97 $0.10 $174.07
Percentage Increase 0.06%

National Bank Earnings Fall 48%

While National Bank of Canada announced their near 2% dividend increase, they were also reporting Q2 2016 earnings – and boy, they weren’t great. The thing is, however, that the big hit was only due to “result of a sectoral provision for credit losses recorded for producers and service companies in the oil and gas sector”. Their sectoral provision amounted to $183 million.

NA reported net income of $210 million for Q2 2016, while they reported $404 million in Q2 2015 – which marks the humongous 48% drop in earnings.

Things aren’t so bleak however, if we take into account that with adjusted earnings (not including the provisions for credit losses and specified items), earnings would have been $420 million, which is actually a 2% increase over last year.

Here’s a link to NA’s Q2 2016 earnings report, if you’re interested in reading more details.

3 Replies to “National Bank of Canada Raises Dividend 2% While Profits Fall 48%”

  1. Well that is great news for you bud! congrats! Any extra income is a win in my book. Its kind of crazy how that all works with the earnings drop but I have never been one to be able to analyze those reports properly to see what is really going on. Glad to see you are on it!

    1. Hey Alex,

      Nice to see you in to stocks. 🙂
      Thankfully, NA made it very easy for the investors by disclosing their payout ratio in their press release. It says that their payout ratio for the past quarter and past two quarters equates to 61%, versus 44% last year. So… they’re paying out about 17% more but considering it’s most likely a one time occurrence I know they will be able to pull through. Thanks for commenting.

  2. Nice, I’m holding a decently sized position in NA and it’s great to hear they’re increasing dividends even while experiencing some difficult times.

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