Canadian bank stocks are typically among the first I examine when considering top long-term dividend stocks to buy today for retirement. The largest Canadian banks continue to be among the most well-capitalized and secure global banks, supported by a regulatory environment that is as beneficial for long-term investors as it comes.
That said, not all Canadian banks are created equal — far from it.
In this article, I’m going to compare and contrast three top Canadian banks and discuss which investor type may be best suited to each.
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Toronto-Dominion Bank
I’ve long thought Toronto-Dominion Bank (TSX: TD) provides some of the best all-around upside for long-term investors.
Indeed, in terms of total returns in the Canadian banking sector, it’s hard to find a peer that comes out on top. With a dividend yield of 3.6% and one of the best-looking charts among its peers, TD is a company that provides the proper capital appreciation and dividend profile that I believe long-term investors are after.
Much of TD’s growth profile stems from the U.S. market, where TD actually has a larger retail footprint than it does at home. So, for those looking to benefit from continued strong growth out of the North American market more broadly, TD would be my top way to play this trend.
Royal Bank of Canada
For investors who lean more toward portfolio stability and capital preservation, Royal Bank of Canada (TSX: RY) is my top pick.
After all, Royal Bank is the only choice among these top three options that’s considered a top-10 global bank and systemically important. What that means in plain English is that Royal Bank can’t go bankrupt — the “too big to fail” moniker will stay with this bank for as long as it’s around.
With one of the longest track records of not only dividend increases but also years of operation in Canada, Royal Bank is among the most defensive and stable cash flow generators this sector has to offer. What I particularly like about Royal Bank compared to its peers is its strong capital markets business, which diversifies its revenue streams considerably and makes Royal Bank an even more attractive long-term investment option than its peers for those who err on the side of caution.
Bank of Nova Scotia
Investors seeking a higher upfront yield (and potentially a slightly better long-term growth profile driven by the company’s international operations) may want to consider Bank of Nova Scotia (TSX: BNS).
Scotiabank has long been viewed as a laggard, in part due to the company’s hefty international investments in the past. Those investments haven’t necessarily yielded the kinds of returns some investors were hoping for. That is, until recently, when Scotiabank’s earnings began to highlight the growth that many saw as inevitable.
With one of the best balance sheets in its peer group and an impressive recent growth rate driven by its Latin American business, I find Scotiabank compelling, given its dividend yield of 4.6%. There’s a lot to like about where this top Canadian bank is headed from here.
