It is impossible to recommend one particular stock without knowing an investor’s risk tolerance, financial situation or goals. There are many factors that go into stock selection, and every investor has their own goals and are most likely at varying stages of their investment life.
So, why then would I recommend Toronto-Dominion? The reason is simple. Toronto-Dominion is a foundational stock for any portfolio. Whether you are just starting out, a seasoned investor, or heading into retirement, Toronto-Dominion offers a little something for everyone.
A consistent and reliable performer
Over the past decade, no bank has performed better than Toronto-Dominion. Take a look at the chart below:
As you can see, Toronto-Dominion has returned on average 20% annually over the past 10 years. This type of growth and reliability is what any investor is on the lookout for.
Toronto-Dominion has achieved these impressive results thanks to its top-notch management team.
A top income stock
Canada’s Big Five banks are synonymous with dividends. In some cases, Canada’s banks have been paying out uninterrupted dividend for over 100 years. Even during the worst financial crisis of our lifetime, Canada’s banks escaped unscathed. Although they kept their dividends steady, none cut them.
It is no wonder then, that Canada’s banks are viewed as some of the safest income investments in the world. Over the past number of years, Toronto-Dominion has emerged as the best bank for dividend growth. The company has regained Canadian Dividend Aristocrat status and has raised dividends for eight consecutive years.
Averaging double digits, Toronto-Dominion has the best one-, three-, and five-year dividend-growth rates among its peers. It also has the second-lowest payout ratio based on next year’s earnings. As such, income investors can expect the bank to continue out-raising the competition.
A top growth stock
Over the past five years, Toronto-Dominion has averaged 11.8% annual earnings growth. It is the only Big Five bank to achieved double-digit earnings growth over that period. Although growth is expected to slow against the backdrop of uncertain macroeconomic conditions, its 6.8% five-year expected earnings growth rate also tops the group.
A top value stock
For the first time since 2016, the company is trading well below its historical price-to-earnings average of 12.6. The closest thing to a guarantee in this market is that Canada’s banks always return to trade in line with historical P/E averages.
Unless we experience another macro event similar to the financial crisis, expect Toronto-Dominion‘s stock to rebound. In fact, it has only been this cheap twice — for a brief period in 2011 and during the financial crisis in 2008-09. This is a unique opportunity to pick up a high-quality stock on the cheap.
Which stock would I buy today? I would, without a doubt, buy Toronto-Dominion Bank. It remains a best-in-class stock and operates in one of the safest financial jurisdictions in the world.
It has a sound growth strategy, flawless execution, and an attractive dividend. Combine these traits with today’s cheap valuations, and you are looking at a strong buy regardless of investor type.
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Fool contributor Mat Litalien owns shares of TORONTO-DOMINION BANK.