The five largest banks are scheduled report fourth-quarter earnings before the week ends, beginning on Tuesday with Bank of Montreal (TSX:BMO), which hasn't increased its dividend since the first half of this year.
That makes it a ripe candidate for a modest dividend hike, said Barclays analyst John Aiken, who also expects both CIBC (TSX:CM) and the smaller National Bank (TSX:NA) to boost their payouts this time around.
"We see little reason to believe that fourth-quarter earnings will generate much downside pressure as we forecast that average core earnings growth will be positive," he said in a note.
Canadian banks have made a habit of raising their dividends twice a year since the economic downturn. While the rest of the major players upped their payments in the third quarter, even they could deliver a surprise increase, suggested Brad Smith, senior financial services analyst at Stonecap Securities.
"You can't count out Royal, Scotia and TD, all of which increased their dividends last quarter," he said in an interview.
"I think in some respects they don't want to get into a lockstep dividend expectation. I think they want to mix it up. I'd say it's a very low probability, but not a zero probability."
Dividends will be a highlight in what's otherwise characterized as an encouraging, but unsurprising, earnings season for the banking sector, which is wrapping up the financial year ended Oct. 31.
Much attention will be focused on what bank executives have to say about next year, including whether they think the Bank of Canada will keep its trend-setting rate at a low one per cent, where it has been since late 2010 due to weak global economic conditions.
"I don't think we're going to get a rate hike next year," said Gareth Watson, vice-president, investment management and research at RichardsonGMP.
That echoes the sentiment of a growing number of economists who say the move won't be made until 2015.
Watson said he anticipates the banks will maintain their steady earnings growth of five to 10 per cent for next year.
Bank stocks have been climbing in recent months helped by optimism about the Canadian financial industry's position in the global economy relative to their international competitors. Since January, the TSX financials sector has risen more than 20 per cent, while all of the banks touched fresh 52-week highs in November.
"We expect generally good fourth-quarter results, with several potential tailwinds benefiting the banks," said Gabriel Dechaine, an analyst at Credit Suisse.
He pointed to momentum in the wealth management operations as one area of strength.
Executives at several banks have said in recent months that a major focus will be placed on their wealth management divisions, which house the financial planning operations and portfolios for both average investors and high-net worth individuals.
Most of the banks report later in the week, with National Bank due on Wednesday and TD Bank (TSX:TD), Royal Bank (TSX:RY) and CIBC scheduled for Thursday.
Scotiabank (TSX:BNS) wraps up the season when it reports on Friday.