Canadian savers have just one month to complete their RRSP contributions for the 2015 tax year.

Many investors prefer to hold dividend-growth stocks in their self-directed accounts, and the banks are often high on the list of recommended names.

Let’s take a look at Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Bank of Montreal (TSX:BMO)(NYSE:BMO) to see if one is a better pick right now.


TD’s retail operations drive more than 90% of the company’s net income. The Canadian personal and commercial segment is the most profitable group, but TD also has a massive retail network south of the border. In fact, TD has more branches in the United States than it does in Canada.

TD earned $8.75 billion, or $4.61 per share, in net income for fiscal 2015, up 8% compared with 2014.

The impressive results are a signal to investors that TD has a pretty good handle on costs and is finding ways to increase revenue even as the industry battles with low interest rates and some economic weakness in parts of the Canadian market.

The U.S. presence is a huge reason the stock is holding up so well. Every U.S. dollar in earnings now translates into more than CAD$1.40, and profits from the U.S. operations jumped 21% in 2015.

TD is also perceived as being the safest Canadian Bank. Its energy loans represent less than 1% of the total loan book, and only 44% of the Canadian residential mortgage portfolio is uninsured. The loan-to-value ratio on that component is 61%, which means the housing market would have to crash hard before TD takes a material hit.

TD raised its dividend by 9% in 2015 and the current payout yields about 3.9%.

Bank of Montreal

Bank of Montreal is attractive because it has a very balanced revenue stream.

The retail operations are still the foundation of the bank and generate 60% of the company’s net income, but the bank also has a large capital markets division that produces 21% of earnings and a growing wealth management group that now accounts for 19% of the total profits.

Fiscal 2015 adjusted net income came in at about $4.68 billion, up about 5% from 2014. Adjusted earnings hit $7 per share, up from $6.59 per share in the previous year.

Like TD, Bank of Montreal has a large presence in the United States with more than 500 branches serving two million customers. In 2015 the U.S. operations delivered a 25% year-over-year gain in adjusted net income, driven by strong commercial and industrial loan and a surge in the U.S. dollar against the loonie.

Bank of Montreal recently closed its acquisition of GE Capital’s Transportation Finance business. The deal should boost revenue and earnings in 2016 and will strengthen the company’s commercial banking unit.

Energy loans make up about 2% of the total loan book, so there isn’t much concern on that front. The Canadian residential mortgage portfolio is also in good shape. Only 43% of the mortgages are uninsured and the loan-to-value ratio on that segment is 57%, which means Bank of Montreal’s housing risks are lower than TD’s.

Bank of Montreal recently increased the dividend. The current distribution yields about 4.6%.

Which should you buy?

Both stocks are solid long-term RRSP picks, and investors should be comfortable holding either name.

TD is has a more conservative revenue stream due to is larger retail business and offers more exposure to the U.S. market. If you want the safer overall pick, TD is probably the way to go. If you are looking for the highest dividend yield while still investing in a strong business, Bank of Montreal is the better choice.

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Fool contributor Andrew Walker has no position in any stocks mentioned.