Toronto-Dominion Bank: The Best Dividend Stock to Own Forever

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) stock is among the best dividend stocks in Canada. Here is why.

| More on:

When it comes to safety and growth, there are few companies in the world that can beat Canadian banks.

The nation’s five top lenders have been through many recessions, financial crises, and upheavals, but they have rarely disappointed their long-term investors.

Due to their solid position in Canada and increasing presence globally, I’ve always recommend that long-term income investors include at least one or two banking stocks in their portfolios.

Canadian banking stocks provide growth and stability to your income, because they aim to distribute about half of their income in dividends, making them the best dividend-growth stocks in Canada.

And among the top lenders, Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is my favourite pick to own forever. Here is why.

Dividend growth

For long-term income investors, TD Bank offers an attractive dividend yield and potential for capital gains.

Many investors are shying away from banking stocks on fears that the housing market correction in Canada’s largest city, Toronto, could affect their home-lending portfolios.

But that scenario hasn’t play out yet. TD Bank’s third-quarter earnings, for example, have shown that the lender is well on track to close another good year.  

TD Bank’s dividend is solid. It currently pays a 3.35% dividend yield. This dividend has grown about 11% on annualized basis in the past two decades, putting the lender among the top dividend payers in Canada.

And with a relatively safe payout ratio of between 40% and 50%, there is a good chance that investors will continue to get this growth going forward.

U.S. diversification

With a leading position in Canada, TD Bank is also one of the 10 largest lenders in the U.S. with 26,000 employees and deep roots in the world’s largest economy, going back more than 150 years.

This wide presence in the U.S. makes TD Bank a great diversification play, as it generates 27% of its net income from the U.S. retail operations.

The bank also has a 42% ownership stake in TD Ameritrade with a fast-expanding credit card portfolio.

The bottom line

Trading at $71.59 a share at the time of writing, TD Bank stock is up ~8% this year, beating other banking stocks with a wide margin.

I don’t think its upside has run out of steam. With growing economies both in the U.S. and Canada, TD Bank is well positioned to continue its upward journey. Long-term investors can count on TD Bank’s dividend and growth potential for many years to come.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Haris Anwar has no position in the companies mentioned.

More on Dividend Stocks

calculate and analyze stock
Dividend Stocks

TFSA Investors: 3 Dividend Stocks to Consider Buying While They Are Down

These stocks offer attractive dividends right now.

Read more »

data analyze research
Dividend Stocks

Top Canadian Stocks to Buy Right Away With $2,000

These two Canadian stocks are the perfect pairing if you have $2,000 and you just want some easy, safe, awesome…

Read more »

money goes up and down in balance
Dividend Stocks

Take Full Advantage of Your TFSA With These 5 Dividend Stars

Choosing the right dividend stars for your TFSA can be tricky, especially if your goal is to maximize the balance…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

The Best Canadian Dividend Stocks to Buy and Hold Forever in a TFSA

These three top dividend stocks are ideal for your TFSA due to their consistent dividend payouts and healthy yields.

Read more »

open vault at bank
Dividend Stocks

1 Magnificent TSX Dividend Stock, Down 10%, to Buy and Hold for a Lifetime

A recent dip makes this Big Bank stock an attractive buying opportunity.

Read more »

Canadian Dollars bills
Dividend Stocks

2 Incredibly Cheap Canadian Growth Stocks to Buy Before It’s Too Late

Buying cheap stocks needs patience and a long-term investment approach. Only then can they give you extraordinary returns.

Read more »

senior relaxes in hammock with e-book
Dividend Stocks

Top Canadian Stocks to Buy for Passive Income

Want to generate a juicy passive income that can last for decades? Here are three stocks every investor needs to…

Read more »

exchange traded funds
Dividend Stocks

1 Top High-Yield Dividend ETF to Buy to Generate Passive Income

An ETF designed as a long-term foundational holding pays generous monthly dividends.

Read more »