BCE (TSX:BCE) is a stellar dividend stock, primarily for the generous upfront yield, which currently stands at a still-rich 8.4%. Still, even retired income investors should think of investing to maximize one’s total returns. Indeed, capital gains may be less appealing through the eyes of a retiree. That said, gains still matter and should not be neglected to maximize upfront yield.
Oftentimes, chasing yield with zero consideration for growth can lead to a greater risk of stagnant dividend growth or, worse, a dividend reduction of 50% or more.
Undoubtedly, dividend growth and capital appreciation should all come into play when an investor goes on the hunt for a dividend payer. And while BCE’s dividend looks safe despite its size, there are some fundamental issues that investors will need to put up with. Indeed, the telecom business has been under quite a bit of pressure over these past few years. Specifically, the media segment has been a real drag.
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BCE stock: A dividend beauty, but headwinds remain
For now, there are no easy solutions for lagging a business. In any case, lower interest rates are one major catalyst for the broader basket of dividend plays, BCE included. Though I view BCE stock as an intriguing option for those keen on locking in a yield well north of the 8% mark for the long run, I think there are better ways to score a dividend with a side of capital gains.
Just as dividends still matter for young investors focused on growth and capital gains, growth is still important for retirees seeking consistent investment dividends, distributions, royalties, and all the sort to supplement their passive income as they seek to exit the labour force.
In this piece, we’ll look at one dividend giant that I think is a better value right now as we head closer to the fourth and final quarter of the year.
TD Bank: A better income stock for your buck?
TD Bank (TSX:TD) had lost its way in recent years, but more recently, shares of the ailing bank have begun to wake up. The stock has been off to the races since the middle of June. More recently, shares have started appreciating in a semi-parabolic fashion. Undoubtedly, shares of TD Bank have melted up more than 18% in the summer.
As the money-laundering penalties and woes become a distant memory and lower rates look to stimulate loan growth, I’d look for TD stock to begin outpacing the rest of the TSX Index and perhaps the broader basket of Big Six Canadian bank stocks. At writing, TD stock goes for 10.6 times forward price-to-earnings (P/E), which is still quite cheap for a high-quality dividend blue-chip behemoth like TD.
Additionally, the bank finally gave clarity on the leader who will lead the bank into a new era. Seasoned industry veteran Raymond Chun will be heading to the chief executive officer’s office as Bharat Masrani heads for retirement. Indeed, Chun seems like the right person for the job as he inherits a bank that’s eager to move past its regulatory investigations, stiff fines, and all the sort. With a new, proven leader, I think TD is well on its way to becoming a top-tier bank stock again.
I think TD stock is on the cusp of a new bull run that could take it to new highs. Either way, TD stands out as the best bank for one’s buck in October 2024. With a solid 4.7% dividend yield, a modest multiple, newfound momentum, and a new successor in place, TD seems like a fantastic pick for investors seeking gains and passive income (growth).
