Canadians are searching for dividend stocks to help them meet their retirement goals.

Let’s take a look at Toronto-Dominion Bank (TSX:TD)(NYSE:TD) to see if the name is an attractive RRSP investment.

A conservative approach

TD generated fiscal Q2 2016 net income of $2.3 billion–up a solid 5% from the same period last year. That’s pretty good considering the economic headwinds facing the banks right now.

The company is often cited as the safest pick among its peers because TD generates most of its revenue from retail banking operations.

This includes the bread-and-butter activities of providing loans and investment products to personal and commercial clients, much of which is initiated out of the branches.

If you are a TD customer, it’s easy to see why the bank is so profitable.

The company’s client-facing employees are always on the lookout for opportunities to suggest additional credit cards, lines of credit, or investment assistance, and they do it with a personal greeting and a welcoming smile.

For customers, the barrage of offers might be a bit much sometimes, but investors love it.

U.S. hedge

The Canadian operation is best known to investors and provides more than 60% of the company’s earnings, but TD’s U.S. retail group is also important.

The bank actually has more branches south of the border than it does here in Canada, and that provides investors with a nice hedge against difficult times in the home country as well as a safe way to benefit from the strong American dollar.

The U.S. retail division generates about 25% of TD’s net income.


Some investors are concerned the oil rout and an overheated housing market will eventually hammer the Canadian banks.

TD’s direct exposure to oil and gas companies is less than 1% of the total loan book, so there isn’t much to worry about on that front.

As for housing, the bank finished Q2 with just under $250 billion in mortgages. That’s a tidy sum, but 53% of the portfolio is insured, and the loan-to-value ratio on the uninsured mortgages is 58%. This means the government is on the hook for more than half the portfolio and the market would have to fall significantly before TD starts to take a material hit on the uninsured mortgages.


TD has a strong track record of dividend growth and raised the quarterly payout by 8% earlier this year to $0.55 per share. That’s good for a yield of 3.9% at the current price.


TD is trading at 13 times trailing earnings, which is in line with the five-year average.

Should you buy?

The stock isn’t as cheap as it was back in February, but TD still looks reasonable for a buy-and-hold RRSP investment.

Some pundits prefer to wait for a pullback, but that often results in missed distributions, so it makes sense to simply buy TD when you have the funds available.

If you want a reliable dividend stock you can sit on for decades, I think TD remains an attractive pick.

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