Retiring Investors: 1 Great Reason to Add This Bank Stock to Your RRSP

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) has been in the headlines this week. Here’s why it’s a good buy for retirement wealth creation.

| More on:
Bank sign on traditional europe building facade

Image source: Getty Images

When it comes to picking stocks fit for retiring with, Canadian banks are often high on the list. Whether your retirement is far on the horizon or just around the corner, the Big Five pack just the right amount of passive income and defensive properties. But not all Bay Street bankers are equal, so which tickers should you pack in your registered retirement savings plan?

A safe choice for your RRSP

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) pays a 3.85% yield and is up 6.84% in the past year – a moderate amount of growth for a Canadian bank stock, and indicative of its popularity.

Trading just 17% below its 52-week high, TD Bank shares are still a little rich, though, so the strictly value focused investor may want to wait for a dip. In terms of risk, though, TD Bank is in line with the industry, with low external stressors.

This week’s big news for TD Bank involved the biggest financials merger of the year: Charles Schwab acquired TD Ameritrade in an all-stock deal that sees the formation of a $5 trillion financial powerhouse.

The added exposure to the broader financials environment makes for an attractive investment: Moody’s Investors Service Senior VP David Beattie has described the transaction as, “… allowing Toronto-Dominion Bank to continue to participate in the evolving wealth industry in the U.S. through a meaningful stake in a new industry leader with enhanced scale and breadth of product offerings.”

One note of caution, however: TD Bank has been dependent on the markets in the U.S. for a lot of its growth. While this has seen it strengthened in comparison with some other domestic banks, it does leave the Bay Street favourite exposed to a potential recession on the other side of the border.

Other risks could come from a growing level of consumer debt and an overheating housing market.

The best of the rest

For a combination of wealth creation and peace of mind, stacking Scotiabank shares can help lower the risk in a long-term passive income stock portfolio built for a comfortable retirement.

Scotiabank pays investors a 4.8% dividend yield; up 6.8% in the last 12 months it’s a popular choice. Trading 12.9% above its 52-week low, it’s moderately good value for money, too.

Scotiabank is also bullish on North American economies, and does not foresee a recession either side of the border. As CEO Brian Porter puts it: “We’ve classified ourselves as downturn ready, and you can see it in our numbers. We haven’t been stretching for business.”

CIBC has been trading fairly flat for the year; meanwhile, however, it has seen some peaks and troughs: The stock is selling 18.4% higher than its lowest point in the last 12 months. Paying a 5% dividend yield, CIBC is the richest of the Big Five in terms of passive income, making for a reassuring addition to an RRSP.

The bottom line

The systemic risk of a housing market correction would be one of the biggest concerns of a low-risk investor looking to buy and hold bank stocks for the long term.

While Canadian banks are generally low-maintenance investments, holders of RRSPs packed with Big Five dividends would want to keep an eye on the news and manage their portfolios accordingly.

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 Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA. Bank of Nova Scotia is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »

Payday ringed on a calendar
Dividend Stocks

3 Dividend Stocks That Pay Me More Than $54.57 Per Month

These three dividend stocks have done me well over the years, so let's look at how much I've gotten in…

Read more »

Golden crown on a red velvet background
Dividend Stocks

Dividend Royalty: 3 Fabulous Stocks to Buy Now for Decades of Passive Income

Rogers Communications stock and Canadian Natural Resources stock could pay you dividends for decades to come.

Read more »

Dividend Stocks

The Top Canadian REITs to Buy in April 2024

For growth and dividends this April, look to these two REITs that have quite the promising present as well as…

Read more »