Want to make a million dollar egg? Check out this trio of financial dividend payers that cover a wide range of investment styles.
Financial stocks aren’t usually very exciting, but that doesn’t mean they can’t be highly rewarding. And if you want to become a millionaire, you should have exposure to them in your portfolio. Here are three options… WP Carey (WPC -0.81%), Toronto-Dominion Bank (TD 0.21%)and Visa (V -0.19%) — that cover a lot of investment and pay you well to own thanks to their dividends.
1. WP Carey hit the reset button
There is one problem with WP Carey that could turn many investors away: the dividend cut. It is a cynical view of a complex situation.
Perhaps a more appropriate view is that management has hit the reset button, so this is it Investment fund for real estate (REIT) could operate on stronger fundamentals. In essence, he ripped off the bandage and got out of the troubled office sector in one swift move rather than allowing exposure to this asset segment to slowly dwindle to nothing. But with office space accounting for 16% of rents before the sale, that couldn’t happen without a dividend reset.
You know it was a reset because the dividend immediately returned to the rhythm of quarterly increases that existed before the cut. Meanwhile, the exit from the WP Carey office has left a record level of liquidity to invest in new properties.
Or, to put it another way, this REIT is ready to start growing again. And you can collect 5.9% fat yield backed by a growing dividend if you buy it today.
2. Toronto-Dominion Bank admits it messed up
Toronto-Dominion Bank, better known as TD Bank, has admitted that it allowed its U.S bank system to be used by money launderers. It has upgraded its internal controls, paid a roughly $3 billion fine, and now lives under an asset restriction in the United States that will require it to reposition itself balance sheet in this country.
More significantly, all of this means that US growth will be slow or non-existent for some time until TD Bank regains the trust of regulators. It’s not a great outcome, but it’s all part of TD Bank taking responsibility for its mistake.
However, he has cash to pay the fine (he sold part of his stake Charles Schwab to get money), and the banking operation in the USA is only one part of the company’s business.
It is also the second largest bank in Canada, and its operations are not affected by the American problems. This is not a life or death situation; it’s a very low-risk turnaround for a company that has paid dividends every year for more than 100 years.
And you can collect a 5.2% yield while you wait for the bank to break through this headwind. It will probably pay off, even for the more conservative dividend investors.
3. Visa is a dividend growth machine
High yields are great, but some dividend investors prefer dividend growth stocks. That’s where Visa comes in. Although it yields a paltry 0.7%, the dividend has grown at an impressive 18% annualized rate over the past decade.
The dividend has been increased every year for 16 years, so management is clearly committed to paying. The company backing it basically shares a duopoly with Mastercard in the payment processing space, a vital and growing area global financial ecosystem.
What’s really interesting here is that Visa looks relatively cheap these days. That small yield is near the high side of the company’s historical yield range. Meanwhile, the company price by sale and price-earnings ratio ratios are below their five-year averages. To be fair, the stock is trading near all-time highs, but if you’re a growth and income investor, all other signs point to an attractive entry point.
Making an egg the size of a millionaire
Some investors try to become millionaires by betting everything on one or two stocks. It can work, but the risk of a complete washout is huge. Most investors should focus on construction diversified portfolio filled with good companies. That’s exactly what WP Carey, TD Bank and Visa are.
That said, each is likely to appeal to a different type of investor: high yield, turnover, growth and income. But if you take the time to learn about them, you’ll likely find one or more of them are a good fit for your portfolio today.
Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. Reuben Gregg Brewer holds positions at Toronto-Dominion Bank and WP Carey. The Motley Fool has positions and recommends Mastercard and Visa. The Motley Fool recommends Charles Schwab and recommends the following options: Long January $370 calls on Mastercard, short December 2024 $67.50 calls on Charles Schwab and short January 2025 calls on Mastercard at $380 USD. The Motley Fool has a disclosure policy.