1 of the Best Dividend-Paying Bank Stocks to Buy Now and Hold Forever

Here’s a very reliable, dividend-paying Canadian bank stock you can buy at a bargain right now and hold for the long term.

| More on:

Bank stocks are often seen as boring and conservative investments by new investors, but they can also offer attractive dividends and steady returns in the long run. This is one of the key reasons why most wealthy and experienced investors across the world, including Warren Buffett, always prefer to have some exposure to the banking sector in their portfolios.

In addition, most Canadian bank stocks have witnessed a downside correction over the last two years as the higher interest rate environment has reduced their profit margins and loan growth. However, this also means that many bank stocks look undervalued and offer attractive entry points for long-term income investors who want to benefit from the eventual recovery of the sector.

One of the best dividend-paying bank stocks to buy now

One of the best dividend-paying Canadian bank stocks to buy now and hold for the long term is Toronto-Dominion Bank (TSX:TD). With a market cap of $138.1 billion, it’s currently the second-largest bank in Canada, as its stock trades at $77.95 per share with nearly 9% year-to-date losses. At this market price, TD stock offers an attractive 5.2% annualized dividend yield and distributes its payouts on a quarterly basis.

While TD is yet to announce its April quarter results, its total revenue in the 12 months ended in January 2024 rose 9.3% YoY (year over year) to $52.5 billion. Its adjusted earnings in these 12 months, however, declined by 8.9% YoY to $7.76 per share as the ongoing macroeconomic challenges continued to increase its provisions for credit losses.

On the positive side, its net profit in the January quarter surged dramatically by 79% YoY to $2.8 billion. These recent improvements in its profitability were driven primarily by higher fee income from its market-driven businesses and the inclusion of TD Cowen, coupled with volume growth and margin expansion in TD’s Canadian personal and commercial banking segment.

What could help this bank stock recover fast?

Although TD Bank’s profitability saw a major improvement in the January quarter, its U.S. retail banking division continued to face challenges due to the difficult macroeconomic environment and competitive pressures. However, I expect this financial growth trend to improve in the coming years as lower interest rates could boost consumer spending and loan demand.

This positive outlook is also reflected in Street analysts’ forecasts for TD’s future earnings. Notably, analysts currently expect TD Bank’s earnings to decline by 2.7% YoY in its fiscal year 2024 (which will end in October 2024), still showcasing an improvement from its earnings decline rate of 4.3% in its fiscal 2023. To add optimism, Street expects TD to post strong 6.8% positive growth in its annual earnings in the next fiscal year.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDFREQUENCYTOTAL ANNUAL PAYOUT
TD Bank$77.95100$1.02Quarterly$408
Prices as of May 17, 2024

Moreover, TD Bank’s strong capital position and diversified revenue sources could help it absorb any potential delay in economic recovery and support its long-term earnings growth. Given these positive fundamental factors, it could be the right time for bank investors to buy this high-quality dividend stock at a bargain right now and hold it for years to come. Interestingly, if you buy 100 shares of TD Bank with an investment of around $7,795 right now, you can expect to earn around $408 every year from its safe dividends, which are also very likely to grow in the coming years.

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.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

More on Bank Stocks

open vault at bank
Bank Stocks

What to Know About Canadian Bank Stocks for 2025

With interest rates expected to decline further, along with economic uncertainties and U.S.-Canada trade tensions, Canadian bank stocks could see…

Read more »

coins jump into piggy bank
Bank Stocks

Bank of Montreal: Buy, Sell, or Hold in 2025?

Bank of Montreal (TSX:BMO) has a major US presence. Is it a buy?

Read more »

data analyze research
Bank Stocks

Meet the Canadian Stock That Continues to Crush the Market

Here are the top reasons that could support CI Financial stock’s strong upward momentum in the coming years.

Read more »

A worker gives a business presentation.
Bank Stocks

Top Canadian Financial Stocks to Buy Now

Here are two of the best Canadian financial stocks to buy now and hold for the long term.

Read more »

sale discount best price
Bank Stocks

2 Canadian Bank Stocks to Buy at a Discount

Buying these top Canadian bank stocks today could help you lock in attractive dividend yields while building a portfolio geared…

Read more »

ways to boost income
Bank Stocks

Why Smart Investors Own Canadian Financial Stocks

Investing in Canadian financial stocks could not only provide stability during uncertain times but also offer reliable income.

Read more »

a sign flashes global stock data
Bank Stocks

2 Canadian Bank Stocks to Shield Against Market Downturns

These two top Canadian bank stocks could help protect your portfolio from market downturns with their consistent focus on digital…

Read more »

hand stacks coins
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

If you want returns and income, then consider these top dividend stocks for long-term passive income.

Read more »