Financial stocks aren’t usually very exciting, but that doesn’t mean they can’t be very rewarding. And if you want to become a millionaire, you need to have some exposure to them in your portfolio. Here are three options — W. P. Carey(NYSE: WPC), Toronto Dominion Bank(NYSE:TD)And Visa(NYSE:V) — which cover a wide range of investments and pay you well to own them thanks to their dividends.
There’s one problem with WP Carey that’s keeping many investors away: a dividend cut. That is the cynical view of a complex situation.
Perhaps a more appropriate view is that management has hit the reset button, allowing this real estate investment trust (REIT) to operate from a stronger foundation. Essentially, the country ripped the bandage off and exited the troubled office sector in one swift move, rather than allowing exposure to this real estate segment to slowly decline to zero. But with office space accounting for 16% of rents before the divestiture, that couldn’t happen without a dividend reset.
You know it was a reset because the dividend immediately returned to the rhythm of the quarterly increases that existed before the cut. Meanwhile, the departure of WP Carey’s office has given the company record levels of liquidity to invest in new properties.
Or, to put it another way: this REIT is ready to start growing again. And if you buy it today, you can earn a fat 5.9% yield, backed by a growing dividend.
Toronto-Dominion Bank, better known as TD Bank, has admitted allowing its US banking system to be used by money launderers. The country has improved its internal controls, paid a fine of roughly $3 billion, and is now living under an asset ceiling in the United States that requires it to reposition its balance sheet in this country.
More specifically, all this means that US growth will be sluggish to non-existent for a while until TD Bank regains the trust of regulators. That’s not a great outcome, but it’s all part of TD Bank taking responsibility for its mistake.
However, it does have the money to pay the fine (it has sold part of its stake in the company). Charles Schwab to come up with the money), and the US banking operation is just one part of the company’s business.
It is also the second-largest bank in Canada, and its operations are unaffected by the U.S. 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’ll get a 5.2% return while you wait for the bank to muddle through these headwinds. That’ll probably be worth it, even for more conservative dividend investors.
High yields are great, but some dividend investors prefer dividend growth stocks. That’s where Visa comes into the picture. Although the yield is just under 0.7%, the dividend has grown at an impressive annualized rate of 18% over the past decade.
The dividend has also been increased every year for 16 years, so management is clearly committed to the payout. The company it supports essentially shares a duopoly with MasterCard in the payment processing space, a vital and growing part of the global financial ecosystem.
What’s really interesting here, though, is that Visa looks relatively cheap these days. That small return is at the high end of the company’s historical return range. Meanwhile, the company’s price-to-sales and price-to-earnings ratios are below the five-year average. To be fair, the stock is trading near an all-time high, but if you’re a growth and income investor, all other signs point to an attractive entry point.
Some investors try to become millionaires by betting everything on one or two stocks. That can work, but the risk of total washout is enormous. Most investors should focus on building a diversified portfolio filled with good companies. That’s exactly what WP Carey, TD Bank and Visa are.
That said, each will likely appeal to a different type of investor: high yield, turnaround, and growth and income. But if you take the time to learn more about them, you’ll likely find that one or more are a good fit for your portfolio today.
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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 holds and recommends positions in Mastercard and Visa. The Motley Fool recommends Charles Schwab and recommends the following options: January 2025 long calls of $370 on Mastercard, short December 2024 calls of $67.50 on Charles Schwab, and short January 2025 calls of $380 on Mastercard . The Motley Fool has a disclosure policy.
3 Dividend-Paying Financial Stocks That Could Make You a Millionaire, originally published by The Motley Fool
