Canadian investors looking for high quality dividend options have quite a few choices on the TSX today. With stock prices in sectors such as financials still depressed from pre-Covid levels, various blue chip financial companies present excellent defensive equity exposure with above average dividend yields, a winning combination in my book.
Toronto Dominion Bank (TSX:TD)(NYSE:TD) is one of the top choices among the “big six” Canadian banks for a number of reasons. The company’s dividend yield is one key motivator for income-oriented investors. Earnings have come in stronger than excepted recently and some analysts suggest we will see earnings growth in the double digit range this year.
The ability of TD’s stock price to continue to grow in this environment and for the company to maintain or raise its dividend in the future is really dependent on such earning’s growth.
TD’s asset portfolio is among the best of its peers. I do think this bank is better positioned to benefit from an economic recovery coming out of this pandemic, making this stock a great pick with its current yield.
The big question mark many investors, like myself, have with large financial institutions like TD is: “how bad will TD’s bad debt experience turn out to be?”
Until we have better clarity into the structural damage that will be done as a result of the pandemic, volatility for this stock and this sector in general may be higher than normal, as investors price this risk into TD’s stock price. That said, for this dividend yield, TD’s risk-reward offering is attractive in my view.
Invest wisely, my friends.
