When it comes to picking the best Canadian dividend stock for 2026, or for any year for that matter, I would pick Toronto-Dominion Bank (TSX:TD). Dividend stocks, when considered as long-term investments, can be some of the best assets you can own.
While other TSX stocks might be offering significantly more than the current payout by TD Bank, that matters little when you consider the big picture. My reason to recommend TD is based more on its impeccable track record of distributing quarterly dividends, its ability to deliver profitable growth, and its potential to continue growing payouts over time.
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Why is TD a good long-term investment?
The $285.1 billion market-cap TSX bank stock is one of the oldest financial institutions in Canada, and it boasts a long track record of rewarding shareholders through uninterrupted quarterly dividends. The bank has also provided significant growth in its dividends, with its annual distributions increasing at an impressive 8% compound annual growth rate (CAGR) over the last decade alone.
As of this writing, TD stock pays investors $1.12 per share each quarter. Trading at $172.52 per share, its payouts translate to a 2.6% dividend yield. At a quick glance, 2.6% returns might not seem like the most compelling reason to invest in the stock, especially since many other Canadian dividend stocks offer higher-yielding distributions. However, the appeal in TD stock lies more in its resilient business, dividend growth, and income history.
As the bank maintains a strong underlying business, its investors can benefit from rising dividends and long-term capital gains.
Recent performance
TD Bank stock is well-capitalized enough to continue rewarding shareholders with regular distributions. The bank has delivered solid earnings, which will enable it to drive growth for shareholders through dividends, share buybacks, and capital appreciation. The second quarter of the current fiscal year saw TD Bank report a 21% year-over-year increase in its earnings per share (EPS), while its return on equity (ROE) increased by 14.4%.
These results from its quarterly earnings indicate the strength in the bank’s earnings from its capital while improving operational performance. With its current momentum, TD stock looks primed to exceed its fiscal target for 2026 of up to 8% EPS growth and 13% ROE.
The bank boasts solid credit quality, and its provisions for credit losses have declined quarter over quarter, suggesting greater resilience in credit performance. Additionally, higher revenue and continued structural cost improvements mean its dividend payouts and bottom line can grow.
Foolish takeaway
There are several factors that make TD stock a compelling investment. Its personal banking segment benefits from healthy asset quality, and its wealth management and insurance segment has solid momentum. The cost-reduction initiatives recently taken by the bank will result in higher earnings, supporting its ability to keep increasing payouts.
While TD stock might not boast the highest payout among Canadian dividend stocks, it can be a better investment than most others in the long run. With a dividend distribution history spanning 169 years of uninterrupted quarterly payouts, I think it warrants a place in most long-term investment portfolios.
