Investors love seeing their portfolios score massive returns, be it through bonds, stocks, or ETFs, or any other form of security. Every income investor needs to focus on generating consistent cash flow from each asset class. In this regard, I reckon now is the perfect time to jump into Toronto-Dominion Bank (TSX:TD)(NYSE:TD) stock.
Despite a staggering Q1 2021 earnings rise by v10%, TD stock went down by 5.1% due to a drop in loan balances and lower net interest income (NII). However, given TD’s superlative earnings history and consistent efforts towards improving revenues, the decline in TD stock offers a superb playground and a buying opportunity that every investor should look forward to.
Toronto-Dominion trumped its own predictions
TD and five other Canadian banks, such as Bank of Montreal, Scotiabank, CIBC, RBC, etc., surpassed their own analyst earnings expectations for the quarter ending on January 31, 2021. They collectively clocked $13.9 billion in the same quarter, with Toronto-Dominion showcasing tremendous results and successfully climbing above its pre-pandemic levels.
Toronto-Dominion achieved this feat with its lower credit default rates, increased revenues, and lower loan-loss provisions.
In fact, TD’s first-quarter fiscal 2021 adjusted net income jumped to $3.38 billion from the prior-year quarter’s $2.63 billion. Backed by such solid earnings, I believe now is the ideal time to invest in TD stock either directly or within an ETF.
TD sets a benchmark for bold operational strategies
In its bid to streamline “store optimization” in the American unit, Toronto-Dominion announced a shutdown of 82 bank branches in the United States. This is primarily due to declining earnings in the company’s U.S. retail banking segment. Such sales plunged by 16% to $615 million in the first fiscal quarter of 2021. Further compounding TD’s decision was a 6% increase in expenses in the same unit in Q1 2021.
Regardless of what most others may think, I consider this a solid move. It takes streamlined operational teams and management to sail away from losses determinedly. If anything, I think this move shows that TD is getting more efficient with its operations, thereby serving as a perfect investment option, especially for those in for the long haul.
Toronto-Dominion has continued to provide investors with a CAGR of 15% for the past two decades. Moreover, it has been actively incorporating AI and other tech to improve assets return. I think this is going to be bullish for TD’s growth thesis in the long term over the next few decades, at least. Add to that its solid earnings beat and reduced real estate costs, and income investors have a long-term winner!
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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 Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA.