Not only was National Bank of Canada the first Canadian bank to raise its quarterly dividend, it also boosted its payout by more than what some analysts had been expecting - to 66 cents a share from 62 cents. The increase ends a long drought for the banks, who had been prohibited from raising dividends during the financial crisis and the uncertainty surrounding new international banking regulations.
But, of course, there are more reasons to own a bank stock than dividend hikes. Michael Goldberg, an analyst at Desjardins Securities, raised his target price on the stock to $73 from $70, while maintaining a "buy" recommendation - even as the bank's chief executive warned about slower growth in fiscal 2011.
While the dividend increase was double what he had been expecting, the target price increase was due mostly to other factors. He increased his 2011 earnings forecast to $6.30 a share, up from $6.05 a share, introduced a 2012 earnings forecast of $6.60 a share.
"These forecasts are at the modest end of National's 5 to 10 per cent mid-term earnings-per share growth objective," he said.
Then again, more dividend boosts won't hurt either. Mr. Goldberg noted that National Bank's payout ratio is at a modest level and should be able to raise its quarterly payout by 2 cents a share every six months for the next year. In other, 12 months from now, the payout should be 70 cents.