It can be really hard for millennials to convince themselves to start investing in the first place. Our generation is notorious for being basically broke. We live at home, our salaries are stagnant, and inflation and mortgage rates just seem to continue to rise ever higher.
But even if you don’t have much cash at hand, there is a way to start investing safely and see your income rise steadily for decades to come. All it takes is that first step of meeting with your bank and opening a Tax-Free Savings Account (TFSA). Then you’ll just have to choose a safe option that will see you through those years of stress, so when you really need the cash, it’ll be ready and at hand.
A solid option that millennials should then consider is Toronto-Dominion Bank (TSX:TD)(NYSE:TD). This heavyweight of the Canadian bank industry has probably the most going for it right now. First off, there’s its share price. The stock trades at about $72 per share as of writing, with fair value of $81 per share. That’s a potential upside of 12.5% for those that buy today.
Then there’s the company’s dividend. If you’re not familiar, a dividend is a payment by the company each quarter to its shareholders. In TD’s case, that dividend currently sits at 4.08%, meaning you would receive $2.96 per share per year, or $0.74 per share per quarter. The bank also has a strong history of increasing that dividend and consistent payouts. In fact, it has the third-highest consecutive payouts of all the Canadian banks. In the last five years, that dividend has risen an average of 12% every year, with the bank seeing further increases of 7-10% over the next few years.
As a new investor, you’re probably most concerned with share growth. So, let’s dig into that next. If you’re going to own shares for the next two decades, I would look at the last two for a comparison. In TD’s case, shares have increased by 406% as of writing, with only one significant dip during the last recession. During that period, TD managed to come out with shares back where they were before the recession within a year’s time. That’s great news for those concerned about dips in the market.
As for share growth in the future, investors shouldn’t be concerned here either, as TD has a number of projects that should continue to bring in cash. The company has strong retail operation both in Canada and the United States, with its U.S. operations becoming one of the top 10 banks in the country. These operations currently bring in about 30% of the bank’s revenue. TD has expanded into the area of wealth and commercial management — an area proven to be highly lucrative for its peers. Both should continue to see revenue and thus shares rise for years to come.
TD’s most recent quarterly report stated it brought in $12 billion in adjusted profits for 2018 and is on track to top that level over the next fiscal year. That’s even considering a recession, which the bank has prepared for by putting all this cash away.
So, if you’re a new investor looking to make some cash over the long haul, with not much to put in, I would highly recommend TD today. Even just $1,000 today would give you $8,627.25 in 20 years. That might not seem like much, but that’s only with reinvesting dividends and nothing more. Change that number to $5,000, and you’d get $42,520 in 20 years. But if you become serious about investing, I would highly recommend making automatic payments once a month, or even just once a year once you have some income available. That way, you’ll be taking the best advantage of a fantastic stock like TD.
