When times are tough and headwinds mount, it’s easy to be a doubter. But by discounting the safety of their dividends or their bounce-back potential, one only stands to miss out on historic buying opportunities in Canada’s top financial institutions.
NEVER bet against the Canadian banks
Canada’s big banks have been through more than their fair share of crises. They tend to crash hard in recessions and bounce back big when it’s time to expand again.
I’ve heard many folks saying that they would have loaded up on TD Bank or any other Canadian bank stock during the worst of the Great Recession. Back then, many big bank stocks lost around half of their value, while their dividends swelled by around double. Yet these same folks were too startled to buy their favourite bank stocks back in February and March of 2020, when the coronavirus caused many beloved Canadian banks to implode.
TD Bank stock lost over a third of its value, but it was very quick to bounce back alongside the pack, as things inevitably recovered. The opportunity to lock in the swollen yield came and went quickly. If you flinched by listening to sell-side analysts who turned their backs against the banks over headwinds that were already baked into share prices, you missed out on a generational opportunity.
In this piece, we’ll have a closer look at a name that I believe is the best bank for your buck at this critical market crossroads. Enter TD Bank.
TD Bank: The best bank for your buck in April 2021
TD Bank, Canada’s most American bank, has been busy climbing back from the coronavirus market crash over the last several months. The Canadian bank stock is at a fresh all-time high, and I think it has much higher to climb as the headwinds fade in favour of tailwinds.
While the U.S. Fed is likely to stand pat with interest rates over the next year or so, I think that we could find ourselves in a rising-rate environment in as little as three years. Higher rates bode well for the banks, and such an environment could allow the banks to continue to build upon their momentum after years of consolidation.
TD Bank’s brilliant managers may be eyeing a big acquisition
As a bank with a great mix of U.S. and Canadian businesses, TD Bank is atop my banking buy list. The brilliant management team led by CEO Bharat Masrani and his team aren’t known to take on excessive amounts of risk when times are easy. As a result, the bank tends to be among the first to come climbing back when the stage is set for a banking rally.
After having bounced back from the coronavirus recession while steering clear of the Archegos fiasco, TD Bank has its sights set on its next big acquisition, which is likely to be in the states. With more than enough firepower to pull the trigger on a $10-30 billion deal, I think investors ought to think about accumulating shares before TD makes a move.
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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 Joey Frenette owns shares of TORONTO-DOMINION BANK.