Investors looking for reliable dividend stocks often turn to Toronto-Dominion Bank (TSX:TD) due to its long-standing reputation and substantial market presence. However, recent developments have cast a shadow over TD. This has led to another major recommendation for investors — one that offers not just dividends but growth as well!
TD troubles
While TD Bank has been a popular choice for dividend investors, recent issues related to money laundering have raised significant concerns. TD Bank is currently embroiled in a major money laundering scandal, with potential fines exceeding US$4 billion. The U.S. Department of Justice is investigating the bank’s involvement in laundering illicit fentanyl profits, casting a long shadow over its operations and financial stability.
The ongoing investigations and potential penalties pose severe operational risks for TD Bank, particularly in its U.S. operations. Additionally, the scandal has damaged the bank’s reputation, leading to a loss of investor confidence and downgrades from financial analysts and credit rating agencies.
TD Bank is also facing class-action lawsuits from shareholders alleging misrepresentation of its anti-money-laundering controls. These legal challenges add to the financial and reputation risks the bank is currently grappling with. So, despite a dividend yield of 5.27%, shares may go down before they climb back up.
Another to consider
So, where should investors look instead? How about a top stock offering a recent dip: goeasy (TSX:GSY)? goeasy has demonstrated an impressive track record of dividend growth. Over the past decade, the company has increased its dividend by an average of 27% per year. This remarkable growth rate highlights the company’s commitment to rewarding shareholders and underscores its financial health.
The sustainability of goeasy’s dividend is supported by its healthy payout ratio. With a current payout ratio of approximately 31.47%, the company pays out a sustainable portion of its earnings as dividends, ensuring that it retains enough capital for growth and operational needs.
What’s more, goeasy’s financial performance has been stellar. From August 2013 to the present, the company has delivered annualized returns of 29%, transforming a $10,000 investment into about $156,488. This exceptional return is a testament to the company’s robust business model and effective management.
Finally, goeasy serves a significant portion of the non-prime lending market in Canada, catering to over nine million non-prime consumers. This market segment remains in constant demand, providing a steady revenue stream and supporting the company’s long-term growth prospects.
Bottom line
Given the current landscape, goeasy stands out as a more attractive investment option compared to TD Bank. Goeasy’s consistent dividend growth, sustainable payout ratio, strong financial performance, and market leadership in non-prime lending make it a reliable choice for dividend-focused investors. In contrast, TD Bank’s ongoing money laundering scandal, coupled with the associated financial and reputation risks, makes it a less appealing option at this time.
So, despite being on the lower end with a dividend yield of 2.56% and a recent dip in share price, now is the time to buy because goeasy stock is certain to prove during its next earnings report why it’s worth the buy.
