Did you know that Canadian banks offer some of the steadiest and most consistent dividends among all TSX equities?
It’s true!
Worldwide, banks do not have a reputation for ‘safety.’ This year, we saw the collapse of several U.S. banks as well as the European (former) giant Credit Suisse. This came just 15 years after the legendary bank failures of 2008, which triggered the “Great Financial Crisis.”
Global banks can indeed be risky. At times, they are among the riskiest equities out there! Fortunately, Canada’s banking sector is the safest in the world, having produced not a single failed bank in 150 years. In this article, I will explore three reliable Canadian bank stocks that offer consistent dividend yields.
TD Bank
The Toronto-Dominion Bank (TSX:TD) is one of Canada’s best dividend stocks if you’re looking for a high yield along with high dividend growth. The company has grown its earnings by 5.6% per year over the last five years and dividend by 8% in the same period. Despite all that dividend growth, TD still only has a 48% payout ratio! Not a bad showing at all.
The engine of TD Bank’s growth over the last few decades has been its U.S. retail business. That part of TD’s business is likely to continue its rapid growth. The big four U.S. banks – which are similar to TD’s U.S. retail segment – released earnings last month and showed very high growth. Based on comparable company results, we’d expect TD’s upcoming earnings release to be a strong one. The Canadian business faces the challenge of an ever-more unaffordable housing market, but TD’s geographic diversification makes it one of the most appealing TSX banks here.
Royal Bank
The Royal Bank of Canada (TSX:RY) is another one of Canada’s Big Six banks. The case for buying its shares is pretty similar to the case for buying TD Bank’s shares, only the U.S. isn’t as big a part of Royal Bank’s business. If Canada can successfully balance the overheated housing market with the need to keep interest rates at a reasonable level, then Royal Bank will benefit more than TD Bank will, comparatively. Another difference between Royal Bank and TD Bank is that the former bank is far more geographically diversified than the latter. RY has operations in Canada, the U.S., and Latin America. TD is basically only a player in Canada and the United States. So, there are enough differences between TD and Royal Bank to justify owning both.
EQB Inc
Now, so I’m not just boring you with the usual TSX banks you’ve heard about a million times already, here’s one that’s a little out of left yield: EQB Inc (TSX:EQB). Known as “Canada’s challenger bank,” it’s an online-only lender that’s giving the Big Six a run for their money. The bank offers very high interest rates on guaranteed investment certificates (GICs), which helps it attract depositors. It saves money by not having any branches. You might think that having no branches would prevent EQB from attracting long-term clients, but apparently not! EQB is growing extremely quickly, having grown its revenue by 88% and its earnings at 122% in the most recent quarter. The five-year compounded growth rates have also been very good.
