Are you looking for income plays to buy with, let’s say, $4,600?
If so, Canadian dividend stocks are very much worth looking at.
Canada’s Toronto Stock Exchange is dominated by dividend-paying sectors like banking, energy and utilities. Companies in these industries are among the most stable and reliable out there. Many of Canada’s big banks, in particular, have lasted over 100 years.
With that in mind, here is a Canadian income play I’d buy with $4,600 right now.
Source: Getty Images
TD Bank
The Toronto-Dominion Bank (TSX:TD) is one of Canada’s best-performing large-cap stocks this year. Up 27% year-to-date, it is trouncing both the TSX and the TSX banking sub-index.
Now, when I say that I “would” buy TD stock, I’m putting my money where my mouth is, because I have bought it. In fact, it’s the largest position in my portfolio; I invested considerably more than $4,600 into it late last year after it crashed, and have made gains on the position since then.
Now, if you’ve been watching TD stock since its lows during last year’s anti-money laundering (AML) scandal, you might wonder why I’d still buy it today. After all, the stock is up over 30% since November 2024; does this party not have to stop sooner or later?
Not necessarily! Although TD stock is up quite a bit since last year when it was truly dirt cheap, it is still comparatively cheap. Additionally, it is performing well, having put out an earnings release just last quarter that widely beat analyst estimates. Speaking of which, let’s take a look at TD’s second quarter earnings release and see what we can learn from it.
Decent growth
TD Bank’s second quarter earnings release was a pretty good one, boasting several metrics that were well ahead of analyst estimates. These included:
- $15.1 billion in revenue, up 9.1% (a beat by $1.7 billion).
- $6.27 in reported earnings per share (EPS), up 334%.
- $1.97 in adjusted EPS, down 3.4%.
- A 14.9% common equity tier 1 (CET1) ratio.
- A 4.7 leverage ratio.
Overall, it was a good showing. The revenue growth and reported earnings were well ahead of estimates. The small decline in adjusted earnings was a little disappointing, but the company nevertheless saw positive growth in net interest income (NII). Basically, TD grew in the second quarter.
High margins
In addition to having good growth metrics in the second quarter, TD also had respectable profitability metrics. Some highlights included:
- Net income margin: 23.9%.
- Reported return on equity (ROE): 39%.
- Adjusted ROE: 12.3%.
- Return on tangible book value: 15%.
These are pretty healthy profitability metrics for any company.
Income potential
Last but not least, we get to TD’s income potential. TD Bank declared a $1.05 dividend last quarter. If this is maintained for the next 12 months, then the yield is 4.5%. That’s enough to get $210 in annual dividends if you invest $4,600 (see math below).
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| TD Bank | $92.91 | 50 | $1.05 per quarter ($4.20 per year) | $52.50 per quarter ($210 per year) | Quarterly |
Foolish takeaway – passive income stocks
The bottom line on passive income stocks like TD is that they are real, but it takes time to make serious money with them. As the table above shows, you can get about $210 per year back by investing just $4,600 in TD. That might not seem like much, but it will add up over time if you keep investing.
