Canada’s banks to cement status as solid investments in a crisis

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FILE PHOTO: A man walks in front of buildings in the financial district in Toronto, January 28, 2013. REUTERS/Mark Blinch

(Reuters) – Canadian banks, whose dividends yields climbed during the financial crisis, are again gaining favor with investors, as their pledges to maintain payouts gives them an edge over global counterparts who have shunned them.

Canadian banks are currently offering dividend yields of 5.7% versus U.S. banks’ 4.2% and European lenders’ 1.7%, according to Datastream.

Dividends are seen as evidence of good financial health and encourage loyalty from investors, particularly in the current low-yield environment.

Canadian lenders have seen the smallest declines in share prices versus peers in Europe and the United States in the past three months.

“Globally, there continues to be a pursuit for yield … and there are simply not many places where you can get yield anymore,” said Kash Pashootan, Chief Executive Officer of First Avenue Investment Counsel.

“That has forced investors into the dividend-generating equity realm … Canadian banks are a natural beneficiary of that,” he added.

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