Being consistent can help you select an excellent dividend stock. Focus on financially strong companies too. On both fronts, Royal Bank of Canada (NYSE: RY) and Toronto-Dominion Bank are hard to beat. Learn about these Canadian financial giants and why they could deliver decades of passive income.
First, RBC and TD are Canadian banks. This is crucial while looking at banks because banking regulation varies by country. Canada regulates its banks more strictly than the U.S.
The outcome is two crucial things investors should know. First, Canadian banks are conservative locally and abroad. Second, increased regulation has really entrenched the country's largest banks. A solid corporate foundation allows these institutions to grow. RBC and TD are major Canadian banks.
RBC and TD have initial appeal. It doesn't end there. Royal Bank of Canada has dividended continuously since 1870. Toronto-Dominion Bank dividends began in 1857. These two Canadian finance titans have shown to be solid dividend payers, but previous performance does not ensure future success.
Both of these banks retained dividends during the Great Recession, while many of the top U.S. banks cut them. While Canadian bank regulators forbade dividend increases, dividends resumed rising after they were allowed to.
Being ready for everything, even the worst. Despite the Great Depression and Great Recession, these institutions paid investors. Great, but what about the future? The Tier 1 ratio measures a bank's financial resilience. Higher percentages are desirable.
TD Bank's Tier 1 ratio was 13.9% in Q1 2024. It proudly claimed the second-best Tier 1 ratio in North America. Amazingly, only one regional bank is better prepared for hardship than TD Bank. RBC's Tier 1 ratio ended the quarter at 14.9%. RBC is that bank. These are the two strongest North American banks financially.
Both of these safe passive income stocks will grow by expanding into the US as they build on their excellent Canadian banking base. The U.S. market is fragmented and allows for acquisition-driven expansion, giving both opportunities.
Dividend investors can earn high yields while these two Canadian giants grow for decades. The yields of RBC and TD Bank are 4.1% and 4.9%, respectively. Both outperform an S&P 500 index fund (1.3%) or the average bank (2.9%), using SPDR S&P Bank ETF as a proxy.
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