Is The Toronto-Dominion Bank (TD) the Best Canadian Dividend Stock to Buy For Income Investors?

As an income investor, you're always on the lookout for reliable, high-yielding dividend stocks. One name that often comes up in these discussions is the Toronto-Dominion Bank (TD). But is TD the best Canadian dividend stock for income investors? Let's dive into the data and find out.



First things first, let's take a look at TD's dividend history. As of January 11, 2025, TD has an annual dividend of $2.99 per share, with a yield of 5.52%. This is a solid yield, especially when compared to other Canadian banks. For example, the Royal Bank of Canada (RY) has an annual dividend of $4.60 per share, with a yield of 4.80%, while the Bank of Nova Scotia (BNS) has an annual dividend of $3.24 per share, with a yield of 4.70%. So, on the surface, TD seems like a strong contender for income investors.



However, it's not just about the yield. We also need to consider the dividend growth rate. TD has a strong track record of increasing its dividends over time. The bank has increased its dividend every year for the past decade, with an average annual growth rate of around 10%. This is higher than the average dividend growth rate of its peers in the banking sector, which is around 7%. Additionally, TD's dividend growth rate has outpaced the growth rate of the S&P/TSX Composite Index, which has an average annual growth rate of around 6% over the same period. This indicates that TD has been able to generate significant value for its shareholders through dividend growth, compared to its peers and the broader market.



Another important factor to consider is the payout ratio. The payout ratio of TD as of 12/30/2024 is 88.79%. This means that TD is paying out 88.79% of its earnings as dividends to shareholders. This is a relatively high payout ratio compared to other Canadian banks. For example, the payout ratio of the Royal Bank of Canada (RBC) is around 50%, and the payout ratio of the Bank of Nova Scotia (BNS) is around 60%. This indicates that TD is distributing a larger portion of its earnings to shareholders compared to its peers. However, it is important to note that a high payout ratio does not necessarily mean that the dividend is unsustainable, as long as the company's earnings are stable and growing. Additionally, a high payout ratio can be a positive sign for income investors, as it indicates that the company is distributing a larger portion of its earnings to shareholders.



In conclusion, TD is a strong contender for income investors looking for a reliable, high-yielding dividend stock. With a solid dividend yield, a strong track record of dividend growth, and a relatively high payout ratio, TD offers many of the qualities that income investors look for in a dividend stock. However, it's important to remember that no stock is without risk, and it's always a good idea to diversify your portfolio to spread that risk. So, while TD may be a great addition to your income portfolio, it's not the only stock you should consider.