1 Dividend Superstar I’d Buy Over This Bank Stock

If you want a great dividend stock, sometimes it’s best to go big or go home, especially if it’s this other bank stock.

| More on:
stock research, analyze data

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

When it comes to dividend-paying stocks on the TSX, Royal Bank of Canada (TSX:RY) often steals the spotlight as a true dividend superstar. With a forward annual dividend yield of around 3.49% at writing and a robust payout ratio of 48.98%, RY has consistently rewarded its shareholders. The bank recently reported an impressive net income of $4.5 billion for the third quarter (Q3) of 2024, reflecting a 16% year-over-year increase. This kind of financial strength not only solidifies RY’s reputation as a dividend powerhouse but also gives investors confidence in the sustainability of its dividend payments. And yet, there is another that’s been stealing some attention.

CWB

In contrast to RY, Canada Western Bank (TSX:CWB) has had a more challenging quarter, reporting a common shareholders’ net income of just $41 million, a staggering 50% drop from the prior year. Despite declaring a cash dividend of $0.35 per share—an increase of 6% from last year—CWB’s overall financial performance leaves something to be desired. The increase in dividends may sound appealing, but when you consider the drastic decline in earnings and the backdrop of rising provisions for credit losses, it raises questions about whether those dividends can be maintained in the long run.

While CWB has seen growth in revenue, driven primarily by a 5% increase in net interest income, this pales in comparison to the challenges it faces with impaired loans. The dividend stock recently cited significant increases in provisions for credit losses — particularly linked to specific borrower circumstances. As CWB navigates this rocky financial landscape, the sustainability of its dividend payout remains a concern. Investors may find themselves wondering if this bank is as stable as it once appeared.

Meanwhile…

Conversely, RY is basking in the glow of strong financial metrics, such as a return on equity (ROE) of 15.5% and a net interest margin that has benefited from higher market rates. The inclusion of HSBC Canada’s results has further bolstered RBC’s income. This means more capital to distribute to shareholders. It positions RBC not just as a dividend payer. But as a reliable investment that prioritizes growth, making it a more attractive option compared to CWB at this time.

Moreover, RBC’s strategic moves, including share repurchases and investments in various sectors like Wealth Management and Capital Markets, highlight its commitment to shareholder returns. The dividend stock’s focus on diversifying its income streams and enhancing its operational efficiency adds another layer of security for dividend investors. In this environment, CWB’s future could appear uncertain as it prepares for an acquisition by National Bank of Canada, which might disrupt its current dividend strategies.

Bottom line

While both RY and CWB have their merits, RY shines as the clear dividend superstar on the TSX. With its robust financial performance, commitment to returning value to shareholders, and strategic growth initiatives, it stands out as a solid choice for those seeking reliable income through dividends. Meanwhile, CWB’s recent challenges and uncertain future pose potential risks for dividend investors, making it a less appealing option in the current market landscape, especially with an acquisition coming up that leaves future investments uncertain.

Should you invest $1,000 in Granite Real Estate Investment Trust right now?

Before you buy stock in Granite Real Estate Investment Trust, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Granite Real Estate Investment Trust wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

Dividend Stocks

3 Canadian REIT Stocks to Buy and Hold for the Next Quarter-Century

These three Canadian REITs trade cheaply and are highly reliable, making them some of the best stocks you can buy…

Read more »

A train passes Morant's curve in Banff National Park in the Canadian Rockies.
Dividend Stocks

1 Practically Perfect Canadian Stock Down 24% to Buy Now and Hold for Life!

CNR stock is a top Canadian stock for investors, especially with shares down on the TSX today.

Read more »

Canada national flag waving in wind on clear day
Dividend Stocks

The Best Canadian Stocks to Buy Right Away With $30,000

If you have $30,000 you're willing to invest, these are some of the first Canadian stocks to consider on your…

Read more »

rail train
Dividend Stocks

What to Know About Canadian Pacific Railway Stock for 2025

CP stock has now gone through a major merger, so what do investors have to look forward to?

Read more »

ways to boost income
Dividend Stocks

Top Canadian Value Stocks I’d Buy for Dividend Growth and Appreciation

If you are looking for income and capital appreciation, here are three Canadian value stocks for a great total return…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Canadian Stock to Buy With $2,000 Right Now

The company’s powerful combination of growth, income, and value, positions it well to deliver solid returns, making it a smart…

Read more »

Transparent umbrella under heavy rain against water drops splash background. Rainy weather concept.
Dividend Stocks

This 10.6 Percent Dividend Stock Pays Cash Every Single Month

Are you looking to invest for a rainy day? This 10.6% dividend stock pays cash every month, irrespective of the…

Read more »

A worker gives a business presentation.
Dividend Stocks

Market Dip: Opportunity or Risk This April?

This market dip might have investors worried, but should they be excited instead?

Read more »