TD Bank has seen its stock climb about 12% per year on average over the last decade. At the same time, TD has been paying out pretty decent dividends along the way, sitting at a current yield of 4%.
An exciting thing about TD stock is that it continues to trade at only about 11.9 times its annual earnings.
2020 is shaping up to be a very interesting year for TD Bank and the banking industry in general. Here are three bold predictions of what 2020 will bring for TD Bank.
First prediction: It will rebound from a sluggish 2019
A slower-than-anticipated run of economic growth in Canada and throughout North America has resulted in some pretty sluggish growth for TD Bank in 2019. Like a lot of other Canadian banks, TD has been impacted by significant rate cuts established in the United States during 2019.
At the same time, though, other investors are seeing a red-hot opportunity here. Financial experts and banking industry insiders project TD to have an earnings-per-share growth rate as high as 7% annually over the next three to five years. TD Bank projects that it will be able to squeeze as much as 10% growth over that same block of time.
This could be an excellent opportunity to jump on board one of the most established long-term investment vehicles in the banking world at a discounted rate.
Second prediction: It will bottom out by the middle of 2020
At the same time, some industry experts believe that TD Bank is going to begin to corkscrew downward, just like it was towards the end of 2018.
In the last few months of 2018, TD shares began to crater, culminating in a 52-week low for the year of $65.56 per share by the time 2018 had concluded. The stock has bounced back a little bit since then, currently trading at around $74.15 per share, but that isn’t all that far away from where the stock was valued at nearly two years ago.
TD also has to contend with a Canadian population that is already heavily in debt. Reports suggest that the debt-to-income ratio for average Canadians has climbed 170% over the last year. Not only does this put your average Canadian at risk, but it puts the entire financial services and banking industry in Canada at risk as well.
If this debt-to-income ratio continues to expand, we could be looking at another Great Recession on the horizon by the summer of 2020.
Third prediction: It eventually will bounce back
Of course, if there’s anything that the stock market has shown us over the last three years or so, it’s that things are anything but predictable.
If the second prediction is correct and TD is hit with a downturn, there’s a lot of potential for TD Bank to take off by the end of the year. TD Bank remains one of the largest banks in all of Canada, and that status isn’t going away anytime soon. It has shown resilience in the 2008 crash, and there’s unlikely to be as major of a crash this year.
The Canadian economy is turning around, having added hundreds of thousands of jobs last year alone. Short of a significant bubble bursting or an economic collapse, the odds are pretty good that TD Bank is going to continue to grow steadily, just as it has for the last decade-plus.
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Fool contributor Adam Othman has no position in any of the stocks mentioned.