With its current dividend of 4%, a $10,000 investment would yield $400 in annual dividends. Even better news — over the past 15 years, the dividend has increased by 3.6 times.
TD Bank offers more than just a nice dividend; the bank’s growing presence outside Canada is what excites most investors.
Beyond Canada’s borders
TD is Canada’s second-largest bank. However, TD has an advantage over the biggest bank in Canada, Royal Bank of Canada; TD has a massive and growing presence in the United States. While RBC operates through subsidiaries in the U.S., TD Bank maintains over 1,300 branches and has a dominant online banking operation serving over 6.5 million customers.
The U.S. retail arm has long been TD Bank’s growth engine. In the company’s most recent quarter, U.S. retail revenue grew 7% year over year.
Total number of customers
TD also beats RBC in the number of customers it serves. At the end of fiscal 2019, TD boasted more than 26 million customers worldwide. RBC, however, serves far fewer, with 17 million clients.
As banking customers continue to do more and more banking online, TD is at the front of this trend, with almost half of its clients recognized as digital customers. Compared to traditional brick-and-mortar stores, banks prefer online banking because they save money on overhead costs, and customers prefer online banking for the convenience.
Charles Schwab–TD Ameritrade deal
At the end of last year, the merger of Charles Schwab–TD Ameritrade was announced. This combination of the two biggest publicly traded discount brokers will create a brokerage serving more than 24 million clients. The new brokerage will have more than $5 trillion in client assets: $3.8 trillion from Schwab and $1.3 trillion from TD Ameritrade.
The deal is expected to close in the second half of 2020 and should lead to enhancements for clients by identifying the best capabilities from both firms. Per the agreement, TD’s 42% stake in TD Ameritrade will be swapped for a 13.4% stake in Charles Schwab.
This buyout came in response to the war that erupted, as several brokerages began offering no-fee stock trading. In October 2019, Schwab was the first of the major brokerages to introduce free trades. This move was quickly followed by Fidelity and TD Ameritrade.
The bottom line
With a market cap of $135 billion, TD Bank ranks 19th in the world by market capitalization. With TD’s continued aggressive expansion into the U.S., the world’s largest economy, the bank should continue to grow. TD is currently the sixth-largest bank in North America by total assets, market cap, and earnings.
With its track record of dividend increases, plus its potential for growth not only in Canada but outside the country’s borders, TD Bank is an excellent choice if you are seeking to add consistent passive income to your stock portfolio.
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 Cindy Dye has no position in any of the stocks mentioned.