TD - 2 Ultra-High-Yield Financial Stocks to Buy Hand Over Fist and 1 to Avoid
Finance can be a complex business, but some companies try to keep things as simple as possible. That's exactly why investors will like high-yield Canadian banks Bank of Montreal (NYSE: BMO) and Toronto-Dominion (NYSE: TD) despite the risk of a recession. That said, Annaly Capital Management (NYSE: NLY) , which buys and sells mortgages, is a name that most dividend investors will likely want to avoid. Let me explain.
Recessions are bad for banks because they lead to reduced demand for loans (like mortgages) and often lead to increases in loan delinquencies. This is why, despite the benefit of rising interest rates which allow banks to charge more for loans, investors are so downbeat on bank stocks today. The negative sentiment pushed the dividend yield on Bank of Montreal, or BMO as it's more commonly known, and Toronto-Dominion, or TD, to 4.8% and 4.2%, respectively. Those are very attractive yield levels for what are very conservative investments.
The most important figure to note here is the Tier 1 Capital Ratio , which is a measure of how well a bank can handle adversity. BMO's Tier 1 ratio is 15.8% while TD Bank comes in at 14.9%. In and of themselves, those are pretty good numbers, but the real takeaway is that they are the two best Tier 1 ratios in North America. Put simply, BMO and TD are the best-positioned banks you can buy if you are worried about a recession. And that's a real worry, given that there have already been two consecutive quarters of negative U.S. gross domestic product, which is Wall Street's unofficial indicator of a recession.
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2 Ultra-High-Yield Financial Stocks to Buy Hand Over Fist and 1 to Avoid