Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is giving back some of its recent gains, and investors are wondering if this is a good opportunity to pick up the stock.

Let’s take a look at the current situation to see if TD deserves to be in your portfolio.


The Canadian banks are facing some economic headwinds, but TD continues to deliver solid results.

The company generated fiscal Q2 2016 adjusted earnings of $2.3 billion, up 5% from the same period last year. Much of the success is attributable to TD’s strong retail operations.

The bank’s branches are staffed with an army of highly trained sales people who are always on the lookout for an opportunity to suggest a new product or service to existing clients. When you are looking at millions of customers, it doesn’t take long for additional fees of a few dollars here and there to add up to some strong results.

The Canadian business is best known to investors, but TD actually has more branches south of the border.

The American economy continues its recovery, and the strong greenback means every dollar of profit from the U.S. now converts into CAD$1.30. When stated in Canadian dollars, Q2 net income from the U.S. unit was up 21% compared with the same period last year.


Pundits are concerned the oil rout and a hot housing market will hit the Canadian banks.

TD has less than 1% of its total loan book directly exposed to oil and gas companies, so there is little concern on that front.

Regarding housing, TD finished Q2 2016 with $248 billion in Canadian residential mortgages on the books. That’s a staggering number, but the portfolio looks well positioned to withstand a pullback in the housing market.

The insured component represents 53% of the loans and the loan-to-value ratio on the remaining mortgages is 58%. This means house prices would have to fall significantly before TD sees a material impact.


TD has a strong history of dividend growth. The company raised the payout earlier this year, and investors should see the trend continue, although some analysts believe the size of the hikes could be less robust in the medium term.

The current quarterly payout of $0.55 per share yields 4%.

Should you buy?

The stock enjoyed a nice rally off the January low, so the current pullback caused by Brexit fears could continue in the near term.

I would wait for things to settle down a bit before stepping in, but TD deserves to be an anchor holding for dividend investors with a buy-and-hold strategy. If you have some cash on the sidelines, you might want to consider adding the stock to the portfolio on further weakness.

Just released! One top stock for 2016 and beyond

Exports of liquefied natural gas could be one of the best growth opportunities out there for long-term investors. And, we think we've identified the Canadian company to invest in. It's a global company with operations across nearly 20 countries and 70 locations. We like it so much, we've named it as 1 Top Stock for 2016 and Beyond. To find out why, click here now to learn how to access your FREE copy today!

NEW! This Stock Could Be Like Buying Amazon In 1997

For only the 5th time in over 14 years, Motley Fool co-founder David Gardner just issued a Buy Recommendation on this recent Canadian IPO.

Stock Advisor Canada’s Chief Investment Adviser, Iain Butler, also recommended this company back in March – and it’s already up a whopping 57%!

Enter your email address below to claim your copy of this brand new report, “Breakthrough IPO Receives Rare Endorsement.”

Fool contributor Andrew Walker has no position in any stocks mentioned.