It’s always been a tough call to make when trying to pick a more promising investment bet from among Canada’s banking majors, especially the top two – the Royal Bank of Canada (NYSE:RY) and the Toronto-Dominion Bank (NYSE:TD).

By Vasudha Sharma

Let’s examine which of the two could be a better bet for investors right now.

Net Income

RBC, Canada’s largest lender, reported a stellar first quarter this fiscal, clocking in a 24% jump in its net income that totaled over $3 billion. The growth was driven largely by its personal and commercial banking business. RBC’s booming wealth management arm and its capital markets division also pulled up its numbers.

TD, in comparison, posted a lackluster 6% increase in its net income at $2.4 billion in Q1/2017. It did beat Street expectations, but the margin was clearly slim.

[With a 24% jump in its net income for RBC vs. just 6% for TD it is no contest. RBC wins.]

Return on Equity

Another measure of profitability that investors need to focus on is how much return on equity (ROE) they can expect from these two stocks.

For instance, in Q1/2017, RBC generated the second highest ROE in the Canadian banking pack at 16.7%. This is well above the sector average and a 120 basis point jump from Q4/2016, indicative of consistency.

Compare this to TD, which stands second last among the ‘Big Five’ with a ROE of 12.76%.

The higher the return on equity, the more money the bank is making and, clearly, RBC is the more lucrative option here.

Dividend Yield

The other metric that income-seeking investors must assess banks on, are their dividend yields.

RBC has been consistent in doling out exciting dividends to its investors over the years. In Q1/2017, RBC hiked its payout by 5% to $0.87/share, the largest increase in two and a half years and a sign of the management’s confidence that growth at RBC will remain on an upswing. It should matter to investors that RBC boasts the highest rate of dividend growth over the last five years among Canada’s ‘Big Five’ banks.