The Toronto-Dominion Bank (TSX:TD) is among Canada’s highest yielding Canadian bank stocks. With a 4.9% yield, it has far more income potential than its peer group. The stock has long been a high yielder, as have Canadian financials as a whole. However, the rest of the banking sector has seen yields decline due to capital gains over the last few years. TD largely didn’t join the gains party, which is why its stock has a higher yield right now.
The question investors need to ask themselves is, “How did TD get this elevated yield in the first place?” A big part of it, as I explained above, is that the stock largely didn’t join the party in Canadian banking over the last few years. There may be a good reason for that; if so, it merits close scrutiny.
Nevertheless, TD Bank’s yield is so high that you don’t need to invest all that much in it in order to get $5,000 in annual dividends from the stock. In this article, I will explain how TD’s yield got to be so high, and reveal how much money you’d need to invest in the stock in order to get $5,000 in annual dividend income from it.
TD’s Anti-Money Laundering (AML) scandal
The main reason why TD Bank stock didn’t rally like most TSX financials did over the last few years is because it got involved in an anti-money laundering (AML) scandal and received various penalties as a result. The company got caught laundering money in U.S. states including New York, New Jersey, and Florida. Eventually the U.S. Department of Justice (DoJ) got wind of this and started investigating the company. Shortly afterward, TD started taking charges related to expected fines.
Eventually, TD reached a settlement with the DoJ, which consisted of a $3 billion fine and a $430 billion asset cap. The company’s stock tanked when news of the settlement was announced.
The $3 billion fine held back TD’s 2024 earnings by a significant percentage. The asset cap was a concern too: it made it impossible for TD’s U.S. retail business to grow. TD has to remove money from the U.S. retail segment any time the amount approaches $430 billion. That was a major blow to the U.S. retail segment, traditionally TD’s biggest growth driver. However, the removed money ended up being used to fund a large buyback, which combined with the stock’s depressed share price, ended up driving considerable returns. So the asset cap ended up being a blessing in disguise.
All of the factors above contributed to TD having the high yield it has today. With that explained, here’s how much you’d have to invest in the stock to get $5,000 in annual passive income from it.
How much you’d need to invest in TD Bank to get $5,000 in annual dividend income
In order to get $5,000 in annual dividend income from TD Bank stock, you’d need to invest $106,245 in it. Here’s the math on that:
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| TD Bank | $86.66 | 1,226 | $1.02 per quarter ($4.08 per year) | $1,250.52 per quarter ($5,002 per year) | Quarterly |
As you can see, it takes 1,226 shares costing $86.66 each to get $5,002 in annual passive income from TD Bank stock. That adds up to a $106,245 investment. So, it wouldn’t be too hard to get to $5,000 in annual passive income from TD Bank shares.
