Questions of just how stable dividend distributions are today for various businesses and sectors remain top of mind for many investors, myself included.
I do not see any dividend distribution as a sacrosanct or 100% guaranteed in this environment, as we all largely lack any real insight into the true long-term (or even medium-term, for that matter) impact of the COVID-19 pandemic. However, the dividend paid by Toronto Dominion Bank (TSX:TD)(NYSE:TD) is one I believe is among the safest investors can get today.
The dividend yield of TD, and all its peers, remain elevated for above these companies’ long-term averages. That said, among its peers, TD has one of the lowest payout ratios and has maintained excellent liquidity throughout this crisis, factors which cushion the company's dividend from strong economic headwinds.
Loan loss provisions hit $3.2 billion this past quarter, showing the impact TD’s management team expects will materialize as a result of unemployment levels in bankruptcies which will grip the global economy as government stimulus tapers off.
These loan loss provisions are substantial, and while the stock market did jump for financials after the aggregate results shown by Canada's “Big 5” banks, investors with significant concern take note of these large loan loss provision numbers.
With Laurentian Bank (TSX:LB) recently announcing the cutting of its dividend, the first of its kind by Canadian banks in nearly 30 years, tensions among income investors remain high.
That said, I don't see any material risk for TD's dividend in the near term, though investors ought to monitor their portfolio closely in the coming weeks in months as economic conditions change.
Invest wisely, my friends.
