If you’re still focused on passive income, granted you should be. Yet passive income comes in a few forms. When it comes to investing, investors need to consider both returns and dividend income when looking for passive-income dividend stocks. And perhaps none are better than TELUS (TSX:T) and Toronto-Dominion Bank (TSX:TD).
But of these two, which is the best? And by that, I mean, which is bound to produce the most returns and dividend income in the near future? Let’s take a look at the TSX today.
TELUS
When it comes to future drivers of growth, TELUS stock continues to focus on its wireline business. And for good reason. The company has replaced its legacy network and made a huge upgrade. One that also created impressive growth during the pandemic and will continue its future success.
However, there remain large competitors for TELUS stock, especially out west. Even so, the main reason this stock should do well against its competitors is its pricing. With a focus on fibre, it can offer faster speeds at better prices. For now, it holds just 30% of the Canadian wireless market. But that could grow as the company continues to try and keep costs low for itself and its customers.
The issue, however, is its peripheral businesses. These are the security, agriculture, technology and health sectors. These are small and fast growing but come with a lot of risk and may not even generate profits. While there could be upside potential, the company may drag returns in the mud along the way.
For now, TELUS stock offers a dividend yield of 5.96%, with shares still down 12% in the last year.
TD stock
Then there’s TD stock, which recently went through some pretty difficult earnings, leading to a drop in share price. In the short and medium term, the second-largest bank in Canada by assets could see some issues. The company gets 55% of its revenue from Canada, with the remaining from the United States and other countries.
Yet while the bank has managed to maintain that top-two position in the last few years, which should continue, the presence in the U.S. is an issue at this point. Its U.S. segment has lower returns on equity than its Canadian segment. Further, it cannot acquire First Horizon Bank in the U.S., creating a lag on growth.
Even so, TD stock should continue to see growth in its lower-cost brokerage arm. The company has become well known for developing loans for just about any financial background. Further, its credit card portfolio continues to grow, and as it matures, it should bring in higher-return business. So, while earnings should be quite rough for even the next year, there should be a strong turnaround — eventually, that is.
For now, TD stock trades with a 4.96% dividend yield, with shares down 9% in the last year.
Foolish takeaway
So, which is it? Among the two stocks here, I would go with TELUS stock when it comes down to passive income. The company has a more positive outlook for the next year and beyond. It continues to offer lower-cost options for its customers and should see growth in this space. And even its riskier options should see returns in a growth market.
TD stock will certainly improve eventually, but the next year in earnings will be quite difficult, especially with its massive loan portfolio. So, hold out on TD stock, and maybe consider TELUS stock instead on the TSX today.
