Source: The Canadian Press

Canadian companies starting raising dividends again this week, two lean years after the financial crisis rocked the financial markets and corporate balance sheets.

In a sign of growing confidence in earnings going forward, some of the biggest names increased their payout to shareholders after reporting strong third-quarter earnings.

Dan Dupont, a portfolio manager at Fidelity Investments, said investors were so traumatized after the crash in 2008 that even if the companies were able, they didn’t raise their dividends because investors didn’t want them to.

“They wanted them to keep some dry powder in case things turned out to be worse than we thought or we had a significantly deteriorating economy in 2008 and 2009, which we now know wasn’t the case, certainly in Canada,” he said.

But the tide has changed.

“I think investors feel confident that the future is not as grim as they thought a few quarters ago and they now accept that companies can increase their dividends and they’re actually asking for money back through dividends and buybacks,” Dupont said.

BCE (TSX:BCE), a staple of many portfolios and a benchmark by which dividend paying Canadian companies are often judged, raised its payout on Friday by nearly 8%

But it was only the latest in a string of increases as companies reported their third-quarter results.

The increases came from across sectors as mining companies, utilities and financial institutions decided it was safe to start paying out a little more to shareholders.

Uranium miner Cameco (TSX:CCO) raised its quarterly payment by 43%, while Goldcorp (TSX:G) doubled its monthly payment.

Pipeline company Enbridge (TSX:ENB) increased its dividend last week by 15% as it forecast improved results next year.

The notable exception in the oilpatch was Canadian Oil Sands Trust (TSX:COS.UN) which will pay a first-quarter dividend of 20 cents per share after it completes its conversion into a corporation — down 60% from its current distribution.

Shareholders of some of Canada’s smaller banks saw increases with National Bank (TSX:NA), Laurentian Bank (TSX:LB) and Canadian Western Bank (TSX:CWB) increasing their dividends.

The increases followed a move by Canada’s banking regulator, the Office of the Superintendent of Financial Institutions, which dropped a requirement for increased conservatism by the banks in September.

But shareholders of Canada’s Big 5 banks will likely have to wait another quarter at least before they see any change as though there were many hints by the banks that dividend increases may be coming, they held pat for now.

Scotiabank (TSX:BNS) raised its dividend payout ratio — the amount of its profit it doles out to stockholders — to between 40 and 50% from 35 to 45%, while TD Bank chief executive Ed Clark told investors he hoped the bank would be able to update investors on the dividend situation after its next quarter.

Scotiabank analyst Kevin Choquette called it a key quarter for the banks.

“This quarter represents an important inflection point in terms of the banking industry returning to dividend growth mode after two years of treading water,” he wrote in a note to clients.

Choquette singled out TD Bank (TSX:TD) as a “strong buy” based on a “significant valuation discount.”

Dupont noted that payout ratios are not excessive, so there is a possibility of higher dividends down the road, but said the Canadian market is dependent on commodities and financial stocks.

“So, to a decent degree it also depends on what happens to emerging markets and what happens to our financial market through changes in real estate values and the indebtedness of Canadians.”

Dividends play a key role in most portfolios, providing a stream of cash even when stock prices may be stagnant.

Dupont estimated that dividend returns can make up half of the return in an equity portfolio.

“It is still an attractive area to be invested in and it is still an area that people should be putting more money in,” he said.

“I think generally the trend toward income products is one that is here to stay because people are getting older, they are getting closer to retirement or are retired and need some kind of income.”

IE