The 2 Canadian Banks I’d Buy for Dividend Growth

Royal Bank and TD continue to deliver strong earnings growth with healthy capital positions and growing shareholder returns, making both great Canadian bank stocks for dividend-focused investors.

Jitendra Parashar

Author Bio Jitendra Parashar is a financial journalist who has been writing for The Motley Fool Canada since June 2020. With more than 13 years of experience in financial journalism, equity research, and market analysis, he helps investors understand market developments and identify long-term investment opportunities. Before joining The Motley Fool Canada, Jitendra spent several years at Market Realist covering U.S. equities, major economic developments, and developments in the automotive and technology industries. He also worked in commodity and currency research at brokerage firms, gaining insight into how economic trends, central bank decisions, and geopolitical events influence financial markets. Jitendra writes for beginner investors, dividend seekers, and Canadians looking to build wealth over the long term. He also contributes to the daily TSX Today series, explaining key Canadian market developments and highlighting news investors should watch. Based in India, Jitendra follows Canadian and U.S. markets closely. Outside of work, he enjoys travelling in the Himalayas, street and nature photography, and exploring programming and artificial intelligence. Education MBA in Finance and International Business Bachelor's degree in Journalism Areas of Expertise Canadian and U.S. financial markets, long-term equity investing, dividend investing, macroeconomic and geopolitical trends, automotive stocks, emerging technologies, and artificial intelligence. Social Media Profiles LinkedIn Muck Rack Favorite Investment Quote “Simplicity is the master key to financial success.” — John C. Bogle

Published September 2, 4:00 pm EDT

Dividend investing becomes much more rewarding when the companies you hold keep raising shareholder payouts without slowing business growth. That is exactly what I look for in Canadian bank stocks. While strong earnings could support higher dividends over time, a healthy balance sheet gives a bank more flexibility to keep investing through different economic cycles.

In this article, I’ll highlight two of the best Canadian bank stocks I’d buy for dividend growth and explain why each looks attractive today.

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TD Bank stock

The first Canadian bank I’d consider for dividend growth right now is Toronto-Dominion Bank (TSX: TD), especially after the lender delivered another strong quarter.

Simply put, TD operates across Canadian and U.S. banking, wealth management, insurance, and wholesale banking. Its shares currently trade at $166.23 per share with a market cap of $273 billion. At that price, TD stock offers a 2.7% annualized dividend yield. Despite some recent weakness, its stock is still up 29% year-to-date and 61% over the last year.

That strong run in TD stock becomes easier to understand when we look at its financial growth trends. In the third quarter of its fiscal year 2026 (ended in July), the bank’s reported net income jumped 38% year-over-year (YoY) to about $4.6 billion.

Its Canadian personal and commercial banking business was a major contributor. The segment generated record revenue and earnings, with revenue rising 5% YoY to $5.5 billion as loan and deposit volumes rose and margins improved. TD’s U.S. Banking division’s adjusted earnings also climbed 12% YoY. At the same time, its wealth management and insurance earnings climbed 20%, while wholesale banking adjusted earnings surged 76%.

Meanwhile, the bank is also continuing to invest in digital capabilities, artificial intelligence (AI), client acquisition, and the remediation of its U.S. anti-money-laundering program. These stronger earnings, a rising dividend, and a solid capital position make TD an attractive dividend growth stock even after its impressive rally.

Royal Bank of Canada stock

Another Canadian bank I’d be comfortable buying for long-term dividend growth right now is Royal Bank of Canada (TSX: RY).

Following a 42% run over the last year, RY stock currently trades at $283.11 per share and has a market cap of $392 billion. It also offers a 2.5% annualized dividend yield. Its recent rally reflects continued investor confidence in the strength of the business.

Recently, Royal Bank posted record third-quarter fiscal 2026 (ended in July) results as its net income climbed 11% YoY. Its diluted earnings for the quarter rose 13% to $4.23 per share.

Many of its business segments helped drive that growth. The bank’s wealth management net income surged 32% YoY, mainly because of higher fee-based client assets, market appreciation, and net sales. Similarly, its capital markets earnings climbed 16% as corporate and investment banking activity strengthened along with trading revenue.

In the latest quarter, the bank returned $4 billion to shareholders, including $2.4 billion through common share dividends and $1.6 billion through share buybacks. Putting it all together, Royal Bank offers the great combination I want from a dividend growth stock.