When it comes to Canadian dividend stocks, Toronto-Dominion Bank (TSX: TD) is my top choice for long-term income.
My investment thesis is not based simply on TD’s current payouts. Instead, it rests on three factors that matter more to a long-term dividend investor: the bank’s ability to deliver profitable growth, its history of returning capital to shareholders, and its potential to grow its dividend over time.
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Why I’m willing to hold TD indefinitely
TD is one of Canada’s leading financial institutions, with a long history of rewarding shareholders through regular dividend payments. The bank has also delivered meaningful long-term dividend growth, with its annual distributions increasing at a compound annual growth rate (CAGR) of 8% since 2016.
Today, TD pays a quarterly dividend of $1.12 per share, which translates into a yield of more than 2.6% based on the recent closing price. At first glance, a yield above 2.6% may not look compelling compared with some higher-yielding Canadian dividend stocks. But for me, the appeal of TD lies in the combination of income, dividend growth, and business resilience.
Over a long investment horizon, dividend growth can become increasingly important. With TD continuing to grow its dividend while maintaining a strong underlying business, investors can benefit from both a rising income stream and long-term capital appreciation.
TD is well-positioned for solid earnings and dividend growth
Toronto-Dominion Bank is well-positioned to reward shareholders. It has consistently delivered solid earnings, which are likely to drive its dividends, share buybacks, and share price. In the second quarter of its current fiscal year, the bank’s EPS increased 21% year over year, while return on equity (ROE) reached 14.4%, an improvement of more than 200 basis points from a year earlier.
These results suggest that TD is generating stronger returns from its capital while benefiting from improving operating performance. With this momentum, TD appears well-positioned to exceed its fiscal 2026 targets of 6–8% EPS growth and 13% ROE.
TD’s revenue performance remains broad-based. Its market-driven businesses continue to benefit from strong activity, while Canadian Personal & Commercial Banking is seeing margin expansion and volume growth.
The financial services giant’s credit quality also remains solid. Impaired provisions for credit losses declined quarter over quarter, reflecting resilient credit performance.
At the same time, TD’s positive operating leverage is supporting earnings growth. Higher revenue and continued structural cost reductions strengthen its bottom line and dividend payouts.
Looking ahead, several factors support TD’s ability to generate sustainable shareholder returns. Canadian Personal Banking continues to benefit from healthy asset quality, while Wealth Management & Insurance is maintaining solid momentum. Moreover, accelerated structural cost-reduction initiatives position the bank to deliver higher earnings, thereby supporting its payouts.
In addition, TD maintains a sustainable long-term dividend payout ratio of 40–50%, while retaining sufficient capital to pursue growth opportunities.
Overall, TD’s improving profitability and resilient credit quality position it well to keep rewarding shareholders with higher dividend payments.
The bottom line
TD may not be the highest-yielding Canadian dividend stock, but its growing earnings base and consistent dividend growth make it a compelling long-term holding. As long as the bank continues to grow earnings and maintain a sustainable payout ratio, investors will benefit from higher dividends and capital appreciation. This is why TD remains my top Canadian dividend stock to buy and hold for years.
