Stablecoins are hot on Wall Street. From a big-picture perspective, they represent a mixture of technology and finance. But the newness of stablecoins means they aren't tested to the same degree as the old financial system has been.
If you prefer to own something a bit more staid, take a look at Commerce Bancshares (CBSH 0.55%), Toronto-Dominion Bank (TD 1.69%), and Bank of Nova Scotia (BNS 0.28%). They have all proved they know how to change along with a changing world.
1. Commerce Bancshares is a finance king
Commerce Bancshares' claim to fame is summed up in one number: 57. That's how many consecutive years its dividend has been increased, making it a Dividend King. It has the longest streak among U.S. banks.
After that fact, there's really nothing exciting about Commerce Bancshares. It's a regional bank operating around 300 branch and ATM locations in Missouri, Kansas, Illinois, Oklahoma, and Colorado.
In other words, it's a pretty small bank. But given its small size, that also means it has plenty of room to keep expanding. Don't expect that to happen quickly; that's not the company's style.
On that front, however, management is setting the stage for expansion. It recently agreed to buy FineMark Holdings, a bank with 13 branches in Florida, Arizona, and South Carolina. But the key takeaway here is that Commerce Bancshares clearly knows how to survive hard times and grow steadily over the long term. Exciting? No. Reliable? Yes! The dividend yield is around 1.8%.
Image source: Getty Images.
2. Toronto-Dominion Bank is getting back on track
If a boring bank like Commerce Bancshares isn't your speed, then how about one that just got in trouble with U.S. regulators? Toronto-Dominion Bank's U.S. operation was used to launder money for criminals. That led to a big fine, the need to revamp internal controls, and an asset cap in the U.S. market.
The asset cap effectively means that TD Bank, as it is more commonly known, won't be able to grow in the United States until regulators are happy with its internal controls. The dividend yield is 4.1%, compared to a bank sector average of 2.5%, which might make it more appealing to income seekers.
That said, TD Bank is a giant in Canada and has a long and proven track record of being run in a conservative fashion. But, at the same time, it has also proved adept at changing with the world around it.
Notably, it has paid a dividend since 1857. Raising its payout despite the U.S. issues was the most recent example of this, but the fact that it didn't cut its dividend during the Great Recession, when many of the largest U.S. banks did, is a bigger example. If stablecoins change the world, TD Bank is likely to find a way to adapt and even play in the space itself in some way.
3. Bank of Nova Scotia is changing its business model
Bank of Nova Scotia, normally shortened to Scotiabank, is the last bank up, and it offers the highest yield at 5.7%. Like TD Bank, Scotiabank hails from Canada, but its reach spans from its home country all the way down into Central and South America.
It had historically largely skipped over the U.S. market but has recently begun to change its model. The goal is to provide contiguous banking services from Mexico to Canada, which means Scotiabank needs to materially increase its scale in the U.S. market. To jump-start that effort, it recently bought a roughly 15% stake in KeyCorp.
The "key" to understanding the importance of this move is that it shows Scotiabank's ability to change, quickly, with the times. That will be an important skill if the world embraces stablecoins.
That said, Scotiabank has paid a dividend since 1833 -- even longer than TD Bank! And like TD Bank, Scotiabank didn't resort to a dividend cut during the deep 2007 to 2009 financial crisis and recession. If you buy it now, you can collect a huge yield from a bank that clearly knows how to survive and is willing to adjust its business when change is needed.
Stablecoins could be great, or maybe not
Some investors thrive buying the newest and most exciting things on Wall Street. Stablecoins would still fall into the category for most investors.
If you just can't get yourself to jump on the stablecoin bandwagon, you might be better off with a boring old bank like Dividend King Commerce Bancshares. If you prefer something a bit more exciting, you could step into high-yield TD Bank or Scotiabank. Both are proven survivors and offer attractive dividend yields today.
