TD Bank vs. Royal Bank: How to Allocate $10,000 to Bank Stocks
Written by Amy Legate-Wolfe at The Motley Fool Canada
It has been a tense few months for Canadians trying to get ahead. Inflation, cost of living, and fears of recession are all on the rise. If you're sitting on $10,000 and want to invest in something stable, Canadian bank stocks are a logical place to look. Especially those that have been paying dividends for decades like TD Bank (TSX:TD) and Royal Bank (TSX:RY).
Both of these banks are heavyweights. Each have been paying dividends for more than 20 years. They've also managed to keep raising those payouts, even through market shocks like 2008 and 2020. That kind of consistency is hard to find. But if you're trying to choose between them, or wondering how to split your money, it's worth looking at what each has been doing lately.
TD stock is up about 30% year to date as of writing. That's a big gain for a blue-chip name. The dividend stock reported strong results in its latest earnings report, with revenue of $15.1 billion and adjusted earnings per share of $2.02. It brought in $2.8 billion in net income, even as it dealt with compliance issues in its U.S. operations. TD also posted record revenue in Canadian banking, helped by higher margins and loan growth. Despite a few headwinds, it looks like the business is back on track.
Royal Bank hasn't had the same kind of stock run-up this year, but it's still up over 6% year to date. Its most recent earnings were also strong. The bank reported $5.1 billion in net income and $3.54 in diluted earnings per share. Wealth management grew by 48%, and capital markets increased 24%. Royal Bank is known for being well-diversified, and this report proved it. Every part of the business pulled its weight.
Both TD and Royal Bank yield just over 4%. Both have strong balance sheets and global reach. So where does that leave your $10,000?
If it were me, I'd go with a 60/40 split. I'd put $6,000 into TD and $4,000 into Royal Bank. The reason? TD has more near-term momentum. Its Canadian operations are thriving, and it's rebounding quickly after a rough patch. There's more potential for capital gains in the short term, and the dividend is still generous.
Royal Bank, on the other hand, is a steady force. It doesn't have the same pop right now, but it's reliable and strong across multiple divisions. In uncertain times, it offers comfort. Holding it also gives you a bit of insurance if market conditions shift and growth slows.
Together, you'd be collecting over $400 a year in dividends, just for holding two of the safest stocks in Canada. And that income should grow steadily over time.
COMPANY
RECENT PRICE
SHARES (rounded down)
ANNUAL DIV/YR
TOTAL PAYOUT
FREQUENCY
INVESTMENT
TD
$94.47
63 shares
$4.20
$264.60
Quarterly
$5,950.00
RY
$165.91
24 shares
$5.86
$140.64
Quarterly
$3,981.84
TOTAL
—
—
—
$405.24
—
$9,931.84
This isn't about chasing returns. It's about protecting your future. With recession fears rising and Canadians tightening their budgets, dependable dividend stocks can bring a sense of stability as investors face inflation fatigue, job security worries, and a sense that the cost of living keeps climbing. In such a landscape, owning TD and Royal Bank can be a quiet win.
Of course, there are other strong banks out there. But these two are blue-chip, well-loved, and proven. If you've got $10,000 to invest and want to set it and forget it, this combo makes a lot of sense.
The post TD Bank vs. Royal Bank: How to Allocate $10,000 to Bank Stocks appeared first on The Motley Fool Canada.
More reading
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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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