Historical Look at the Bank Index Dividend Yield and May Investment Fund Flows

Research evidence excerpt

Historical Look at the Bank Index Dividend Yield and May Investment Fund Flows

June 22, 2026

Financial Services Weekly

Historical Bank Index Dividend Yield on an Absolute & Relative Basis Financial Services

The share price return of the Canadian bank index calendar YTD is 26.8%, an outperformance of 1,690bps relative to the S&P/TSX Composite index (‘the

Tom MacKinnon, FSA, FCIA Analyst composite’); including dividends, the total return of the Canadian bank index is 28.6%, a relative outperformance of 1,750bps.

tom.mackinnon@bmo.com (416) 359-4629

At current prices, the dividend yield of the Canadian bank index has drifted to 2.7% from 3.3% on January 2, 2026, and is now the lowest it’s been since Sohrab Movahedi Analyst

January 2001 (Chart 1). To put the current dividend yield into some historical context, its longer-term average has been 3.9% and it has been lower than sohrab.movahedi@bmo.com (416) 359-7157

current levels back in the late 1990s (during the Canadian banks’ ‘urge to merge’ period). Étienne Ricard, CFA Analyst

etienne.ricard@bmo.com (416) 359-5296

At current levels, the bank index dividend yield is ~117% of the S&P/TSX Composite’s ~2.3%, a much ‘skinnier’ premium relative to the longer-term average

Alexander Ponte, CFA

of 157% and post-COVID average of 133% (Chart 2). alexander.ponte@bmo.com (416)-317-4763

Dividends have been an important ingredient for Canadian bank total stock returns. Income-oriented investors are reminded that the “Big 6” generally Cristian Cugini, CPA

cristian.cugini@bmo.com (416)-263-2717

target a 40-50% dividend payout ratio range, and when they reported their fiscal Q2/26 results, they also announced dividend increases ranging from ~4%

Grace MacDonald, CFA