Toronto-Dominion Bank (TSX:TD)(NYSE:TD) has continued to soar higher this year. It has a lot of momentum, and the tailwinds could send the stock into the atmosphere over the next few years. The company has a terrific U.S. segment that will benefit from rising U.S. interest rates, lower corporate taxes, and all the other tailwinds caused by President Trump. If you’re an investor looking for a core holding, and you don’t have the U.S. exposure you want because the exchange rate isn’t attractive, then Toronto-Dominion Bank could be the stock you’re looking for.
Toronto-Dominion Bank is a great Canadian bank, but what many investors may not know is that it’s also known as “America’s most convenient bank.” There are actually more American branches than there are Canadian ones. The Canadian economy is rebounding, but the U.S. economy is much stronger and will present the largest amount of upside for long-term investors.
Sure, the TSX had an impressive run, but the U.S. markets have more upside from current levels thanks to the new policies proposed by the Trump administration. Warren Buffett appears to be bullish on President Trump, especially since he’s bought $12 billion worth of stock since Trump won the election.
Even long-time bearish investor Prem Watsa has turned bullish; he stated the strengthened U.S. economy is the reason for his shift in stance. The announcement definitely caught me by surprise.
Toronto-Dominion Bank has an impressive U.S. banking segment. The company has the greatest exposure out of its peers in the Big Five, and I believe the company is set to be the biggest long-term winner out of the group as well. The management team is not done penetrating the U.S. market, and there could be more moves in the future that will improve the company’s U.S. segment even further.
Toronto-Dominion Bank currently trades at a premium to all of its peers in the Big Five, and I believe this valuation gap will increase going forward as the company’s U.S. segment takes off. Warren Buffett once said, “It’s better to buy a wonderful business at a fair price than a fair business at a wonderful price.” Toronto-Dominion Bank is a wonderful business, but I also think it’s trading at a wonderful price given the huge tailwinds the company will ride over the next few years.
The dividend is the lowest of its peers in the Big Five at 3.12%, but I believe the company is best positioned to raise its dividend by the largest amount over the next five years. Huge capital gains can also be expected with these large dividend increases.
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