Will Toronto-Dominion Bank (TSX:TD) Stock Climb Back Above $80 This Year?

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) has passed through a big buy signal, but investors still have time to jump in.

| More on:
The Motley Fool

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) stock was up 1.4% so far in 2019 as of close on January 10. Shares had still dropped 7% year over year.

The big buy signal for TD Bank has likely passed after its RSI fell below 20 in late December. As of close on January 10, TD Bank stock’s RSI sat at 49, indicating the stock is in neutral territory as we approach the mid-point of the month. That should not drive investors away from adding the stock right now.

Back in December 2017, I’d discussed why U.S. tax reform made TD Bank an appealing addition before 2018 kicked off. The stock had a volatile run in the spring of 2018, but shares eventually soared to all-time highs in the fall of last year. Unfortunately, as was the case with other stocks in the financial sector, TD Bank fell victim to the broader stock market sell off.

TD Bank has a strong showing in fiscal 2018. Adjusted diluted earnings per share rose to $6.47 compared to $5.54 in the prior year. The bank also reported adjusted net income of $12.18 billion over $10.58 billion in 2017. As predicted, TD Bank’s U.S. Retail sector was the largest source of strength throughout 2018. The surge from tax reform is expected to dissipate in 2019, and U.S. growth is also forecast to slow into the next decade.

Global economic risks did not go unmentioned by the bank in its fourth-quarter and full-year report. CEO Bharat Masrani said that the bank faces “a number of macro-economic and geopolitical unknowns in the year ahead.”

In late December, the U.S. Federal Reserve cut its estimate for U.S. gross domestic product in 2019 to 2.3% growth. This was down from its September projection of 2.5% growth. GDP growth in 2018 was also revised down to 3% from 3.1%. The Fed signalled two more rate hikes in 2019, but recent volatility has seriously put that projection into question.

Canada is also facing slower growth projections in 2019 and 2020. The broader economy is feeling the pinch from the sharp decline in oil prices — something the Bank of Canada has called attention to in recent statements. The central bank has also hinted that it will slow interest rate increases going forward to lessen pressure on consumers and the overall economy heading into the next decade.

Slowing U.S. growth is not great news for TD Bank shareholders, but activity south of the border will still provide a big boon to the bank’s business in 2019. The bank’s stock is not oversold, technically speaking, but I still like it as it stands priced below $70. The bank last paid out a quarterly dividend of $0.67 per share, representing a 3.9% yield. This is on the lower end of yields offered by its peers, but TD Bank stock has proven to be one of the top growth stocks among the Big Six.

Investors may want to temper their expectations in 2019, as economic headwinds will keep markets shaky going forward. A shot back to all-time highs is a tall order, but TD Bank is in a good spot to lead a bounce back in Canadian financials this year. The stock still looks like a buy right now.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan owns shares of TORONTO-DOMINION BANK.

More on Bank Stocks

stock research, analyze data
Bank Stocks

Is EQB Inc’s Growth Sustainable?

EQB Inc (TSX:EQB) is possibly Canada's fastest-growing bank. Can it keep up the growth?

Read more »

Young woman sat at laptop by a window
Bank Stocks

Feeling the Pinch in High Mortgage Payments? 2 Easy Ways to Make More Money

Short-term cash needs should stay in safe fixed-income investments. You can aim to make more money by investing long-term capital…

Read more »

Meeting handshake
Stocks for Beginners

Buy This Blue-Chip Dividend Stock and Relax

A blue-chip dividend stock is the best way investors can create passive income and relax, but how do you create…

Read more »

Woman has an idea
Bank Stocks

Better Buy: Royal Bank of Canada Stock or Toronto-Dominion Bank?

TD stock has a better chance of delivering slightly higher total returns and dividend income over the next five years.

Read more »

tsx today
Bank Stocks

TSX Today: What to Watch for in Stocks on Monday, September 18

Strengthening commodity prices could lift the main TSX index at the open today.

Read more »

grow dividends
Bank Stocks

This Is the Only Bank Stock That Has Gained in 2023: Should You Buy Today?

National Bank of Canada (TSX:NA) is the one bank stock that has bucked the negative trend in 2023, which is…

Read more »

clock time
Bank Stocks

Why Now Is the Time to Buy TD Stock in Bulk

TD (TSX:TD) stock continues to trade around value territory, with a dividend yield remaining near 7.5%. Now may be the…

Read more »

Shopping card with boxes labelled REITs, ETFs, Bonds, Stocks
Bank Stocks

Here’s What I Would Buy Instead of RBC Stock

Here's why I personally like this ETF better than RBC stock.

Read more »