Canadian Banks Should Also Suspend Dividends - RBC

Mar.10.09 | About: Royal Bank (RY)

According to Bloomberg, RBC’s (NYSE:RY) bank analyst Andre-Philippe Hardy put out a 67 page note Monday morning, suggesting that Canadian banks should “suspend” their dividends:

“Suspending dividends would help ensure that the banks remain privately capitalized,” said Hardy, the Toronto-based analyst for Canada’s biggest bank.

Investors aren’t valuing Canadian banks as if their dividends are sustainable, Hardy said in the 67-page note. The banks have a median dividend yield of 7.2 percent, compared with a 20-year average of 3.8 percent, the analyst said.

Mr. Hardy, welcome to our bandwagon. Launched just Sunday, in fact (see prior post “Bank Dividend Deja Vu” March 8-09). Most investors will hate the idea of a bank dividend cut, but think of it as walking slowly into a coolish swimming pool; it isn’t so bad once you’re completely immersed.

RBC’s Board of Directors is now in an interesting position. If they don’t take the advice of their very own analyst…?