Better Buy for Passive Income: Suncor or TD Bank Stock?

Suncor Energy Inc. (TSX:SU) and TD Bank (TSX:SU) offer similar passive income and nice value at the time of this writing.

| More on:

The S&P/TSX Composite Index was up 55 points in mid-morning trading on Thursday, April 13. Canadian markets have been on a tear since late March, with the energy sector receiving a boost due to surging oil and gas prices. Despite that, Canadian investors might want to snatch up stocks that can generate consistent passive income in an uncertain environment. Today, I want to determine what top TSX stocks are better for the passive income they offer: Suncor (TSX:SU) or TD Bank (TSX:TD)? Let’s jump in.

Here’s why Suncor Energy stock also offers nice passive income

Suncor is a Calgary-based integrated energy company. This company specializes in the production of synthetic crude from Canada’s oil sands. Its shares have dipped marginally month over month as of late-morning trading on April 13. The stock is still up 5.8% in the year-to-date period.

This company released its final batch of fiscal 2022 earnings on February 14, 2023. In in the fourth quarter (Q4) of 2022, Suncor reported production of 688,100 barrels per day (bbls/d) — up from 665,900 in Q4 2021. Meanwhile, adjusted funds from operations (AFFO) rose to $4.18 billion, or $3.11 per common share, compared to $3.14 billion, or $2.17 per common share, for the prior year.

In Q4, Suncor announced that it would retain and continue to optimize its Petro-Canada retail business. That should help Suncor maintain strong cash flow, as gas prices remain high in this inflationary environment. Moreover, that should help bolster its income offerings.

Suncor currently offers a quarterly dividend of $0.52 per share. That represents a very solid 4.7% yield. Suncor has offered consistent passive income for the long haul, but it was forced to halve its dividend when the COVID-19 pandemic hit. Shares of this energy stock possess a very favourable price-to-earnings (P/E) ratio of 6.7.

Don’t sleep on the passive income that TD Bank can offer going forward

TD Bank is the second-largest financial institution in Canada, behind Royal Bank. Shares of this bank stock have remained largely flat month over month as of early afternoon trading on April 13. The stock is down 7.6% in the year-to-date period.

This bank released its Q1 2023 earnings on March 2, 2023. TD Bank delivered adjusted net income of $4.15 billion, or $2.23 per diluted share — up from $3.83 billion, or $2.08 per diluted share, in the first quarter of fiscal 2022. The bank has continued to draw on the strength of its large United States retail banking footprint. U.S. Retail net income rose to a record $1.58 billion — up 25% compared to the previous year.

Shares of this bank stock last had an attractive P/E ratio of 9.8. TD Bank currently offers a quarterly distribution of $0.96 per share, which represents a 4.7% yield. This bank stock has delivered passive-income growth for 12 consecutive years. That means that TD Bank qualifies as a Dividend Aristocrat on the TSX.

Which is the better buy right now?

This is a close call right now, especially on the passive-income front, but I’m more inclined to snatch up Suncor, as oil prices have gained significant momentum after OPEC production cuts. Moreover, the top energy stock also offers more attractive value at the time of this writing.

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 Ambrose O'Callaghan has positions in Toronto-Dominion Bank. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Investing

An investor uses a tablet
Stocks for Beginners

If I Could Only Buy 2 Stocks in the Last Half of 2024, I’d Pick These

I’m looking to buy two stocks over the next month. Here’s a look at my picks and why you should…

Read more »

gift is bigger than the other
Investing

Millennials: 1 Growth Stock Set to Shine in 2025

Shopify (TSX:SHOP) stock could be worth betting on as it goes for growth in the new year!

Read more »

up arrow on wooden blocks
Stock Market

2 Stocks I’ll Be Adding to My RRSP — Even With the TSX at All-Time Highs

Calian Group and Pan American Silver are two TSX stocks trading at an attractive multiple that can generate market-beating returns…

Read more »

dividends can compound over time
Investing

Here Are My Top 2 TSX Stocks to Buy Right Now

Shares of these fundamentally strong TSX companies have significant room for further growth, making them compelling investments right now.

Read more »

A worker drinks out of a mug in an office.
Dividend Stocks

Is Brookfield Infrastructure Partners a Buy for its 4.75% Yield?

Brookfield Infrastructure Partners (BIP) has a 4.75% dividend yield. Is it worth it?

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Monday, November 4

In addition to the ongoing corporate earnings season, the U.S. presidential election and the Federal Reserve’s interest rate decision could…

Read more »

calculate and analyze stock
Investing

2 Top Value Stocks I’d Happily Scoop Up in November

Here are two top value stocks I'm seriously considering adding this month. They are likely to continue to accumulate over…

Read more »

A data center engineer works on a laptop at a server farm.
Tech Stocks

3 No-Brainer Data Centre Stocks to Buy With $500 Right Now

Data centres are going to be a huge growth opportunity in the next decade. And these are the top buys.

Read more »