2 Dividend Stocks to Replace RBC and TD in Your Portfolio

Royal Bank of Canada (TSX: RY) and Toronto-Dominion Bank (TSX: TD), two behemoths in the Canadian stock market, have recently pulled back. Their combined market cap is a staggering $670 billion, making up 10% of the TSX Composite Index.

Despite delivering strong gains this year, valuations for both banks are stretched, with price-to-earnings (P/E) ratios of 18, substantially above their long-term average of 13. Investors should exercise caution when considering buying these stocks at current levels.

Looking for alternative dividend investments, Pembina Pipeline (TSX: PPL) is an interesting option, yielding 4.5% today. With a market cap of $38.5 billion and a diversified energy infrastructure portfolio, the company has 89% of its income contracted and a payout ratio of only 57%. This enables Pembina to maintain a strong balance sheet and regularly increase its dividend.

Another turnaround stock with a high dividend yield is Richards Group (TSX: RIC), trading at a forward P/E ratio of just 10. With a 4.3% monthly dividend, this $328 million company offers a unique opportunity for investors seeking higher returns.