We recently compiled a list of the 10 Best Bank Stocks With High Dividends.In this article, we are going to take a look at where The Toronto-Dominion Bank (NYSE:TD) stands against the other bank stocks.
In 2023, the US banking industry took a major hit, as Silicon Valley Bank collapsed, followed by the downfall of two other major banks. It was the biggest shake-up the industry had seen since the 2008 financial crisis. Despite the US banking crisis, the past two years have been the best for banks since before the Great Recession. Shocking, right?
Banking Sector Performance 2023
According to McKinsey, banks made $7 trillion in revenue and $1.1 trillion in net income globally during 2023, with a return on tangible equity of 11.7%. They have also strengthened their capital and liquidity, with capital levels at 12.8% and liquidity at 77.2%, both improving from 2022. In fact, banks earned more profit than any other sector worldwide last year. Right now, 14% of banks are making up 80% of the industry's economic profit, which is a big jump from 11% in 2013. This is nearly five times higher than most other industries, where a few big players usually dominate the performance.
In 2023, global dividends surged to a record $1.66 trillion, marking a 5.0% increase on an underlying basis, according to the Janus Henderson Global Dividend Index. The banking sector played a key role in this growth, delivering record payouts and accounting for half of the global increase in dividends. Higher interest rates allowed many banks to expand their margins, with emerging market banks contributing significantly to this increase – though banks in China didn't join in the dividend boom.
The banking sector is anticipated to maintain its strong performance this year, with analysts offering an optimistic outlook. On December 4, 2024, Moody'supgraded the global banking sector from negative to stable. The credit rating giant is positive because G-20 countries are easing up on interest rates and making some monetary adjustments, which should help with the asset quality and liquidity of banks. The economy seems to be stabilizing, and that should help banks recover, especially in terms of deposits. Of course, there are some risks like geopolitical tensions, trade issues, and possible shifts in the US policies under the new president could create uncertainties that might affect the global economy and the banking sector. So, while things are looking better, there is still some uncertainty on the horizon.
Our Methodology
For this article, we used the Finviz stock screener to filter out bank stocks with dividend yields exceeding 3%. We focused on picking stocks with a consistent record of paying dividends, offering dividend growth, and being financially stable to steer clear of yield traps. The list below is ranked in the ascending order of dividend yields, as of December 6. We have also mentioned the number of hedge fund holders in each firm, which was sourced from Insider Monkey’s Q3 2024 database.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here)
A bank teller handling personal deposits with a smile at the counter.
The Toronto-Dominion Bank (NYSE:TD) is a major financial institution offering a wide range of services across Canada, the United States, and internationally. TD provides everyday banking, credit cards, auto loans, investment advice, and insurance products.
The bank has faced significant challenges recently. The Toronto-Dominion Bank (NYSE:TD) has suspended its medium-term financial targets as it undergoes a strategic review following a major settlement over money-laundering violations. The review comes as the bank prepares for a leadership change, with incoming CEO Raymond Chun tasked with navigating the fallout. TD is reassessing its growth strategy, productivity, and capital allocation after agreeing to a $3.1 billion settlement with US authorities over its failure to prevent money laundering. The stock is down by over 14% since the start of 2024.
However, The Toronto-Dominion Bank (NYSE:TD) had a strong third quarter, with revenue up 8% compared to last year. This growth came from higher fee income, solid credit performance, and impressive results in Canadian Personal and Commercial Banking. In the fourth quarter, expenses were higher due to investments in risk and control infrastructure and some legal costs, totaling around $150 million. The bank also faced record catastrophic claims in its insurance business and an increase in impaired PCLs (provision for credit losses) in its non-retail lending portfolios. Earnings for the fourth quarter were $3.2 billion, with EPS at $1.72, both down 8% and 5% year-over-year, respectively. Despite these challenges, the bank is confident in its earnings potential and has announced a $0.03 dividend increase, raising it to $1.05 per share. Shareholders of record by January 10 will get paid on January 31.
Overall TD ranks 2nd on our list of the best bank stocks with high dividends. While we acknowledge the potential of TD as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
