2 High Yielding Financial Stocks to Earn Passive Income for Years
It can be hard to find good returns when things are going well – so now, amid recession fears and a bear market, is a great time for dividend investors to shop. The financial sector is a particularly attractive space if you can think long-term, as some large companies have traded lower and are now offering generous dividend yields. For those who want to think outside the box, Toronto-Dominion Bank (TD -0.61%) and T price. Rowe (TROW -0.67%) are two actions that merit further study.
1. Toronto-Dominion Bank: No slowdown
The Toronto-Dominion Bank, more commonly known by its initials TD, is one of North America’s largest banks. It has a strong position in its isolated and conservative Canadian home market, and a growing business in the United States. The company estimates that it is the sixth largest bank in North America.
That said, thanks to his Canadian roots, he tends to position himself conservatively at all times. Currently, TD Bank’s Tier 1 capital ratio is 14.9%, second best in North America. It means there is only one bank better positioned to weather economic headwinds as fears of a recession spread. But don’t think TD is hiding, running for cover, or circling the wagons. Far from it, he always seeks to develop his activity.
In February, TD Bank announced its intention to acquire first horizon (FHN -0.60%) for $13.4 billion. He followed that up with the announcement in August that he would buy an investment company Cowen Group (COW 0.42%) for $1.3 billion. Both are helping to move the needle: one is increasing TD Bank’s size in traditional U.S. banking, and the other is expanding its investment business. And thanks to investors worried about the economy and the stock market, shares of this ever-growing bank are trading up around 20% so far in 2022, and the dividend yield is up to a generous 4.4%. TD Bank, meanwhile, has paid an incredible dividend for 164 consecutive years, suggesting income investors can count on the quarterly payout for years to come.
2. T. Rowe Price: Okay, that hurts
T. Rowe Price shares are trading around 45% so far in 2022. No doubt that’s a concerning drop, but it’s not that surprising given the negative sentiment on Wall Street. today. This is because T. Rowe Price is an asset manager and he receives fees based on the assets he manages. The bear market reduced the value of the assets managed by the company and investors took money out of the market because they feared further declines. The numbers are shocking, with the second quarter alone seeing T. Rowe Price’s assets under management plummet by just over $242 billion.
One thing to keep in mind, however, is that T. Rowe has increased his dividend every year for over three decades, making him a dividend aristocrat. The past 30 years have seen a number of material bear markets, including the dot.com crash of 2000 and the Great Recession of 2008-09. And T. Rowe Price continued to increase its dividend throughout the ups and downs of the market. In other words, there is no particular reason to think that the current bear market will be so different.
Meanwhile, second-quarter adjusted earnings of $1.79 per share more than covered the quarterly dividend of $1.20 per share. The resulting payout ratio is approximately 66%. This leaves ample room for more adversity before the dividend is threatened. Given the long history of dividend increases, it seems more likely that dividend increases, even if only token hikes, are likely. The dividend yield is now very attractive at 4.4%.
When others are afraid
There is no way of knowing when a bear market will stop falling and start rising again, making it very difficult to buy during a downturn. However, if you can accept a contrarian approach, the Toronto-Dominion Bank and T. Rowe Price are two financial stocks that seem worth a closer look today for high-yield investors on the lookout. seeking reliable long-term revenue streams.