Why TD Bank Is My Favourite Bank Stock Today

Canadian investors should look to snatch up TD Bank (TSX:TD)(NYSE:TD) stock due to its terrific United States footprint.

| More on:
Bank sign on traditional europe building facade

Image source: Getty Images

TD Bank (TSX:TD)(NYSE:TD) is the second-largest financial institution in Canada and one of the largest retail banks in the United States. In May 2020, I’d suggested that the top bank stock was a no brainer buy. Shares of TD Bank have climbed 44% year over year as of early afternoon trading on April 19. The stock is up 14% in 2021 so far.

Today, I want to look at how the bank has bounced back over the past year. Moreover, I’ll discuss why I’m more bullish on TD Bank over its peers as we move further into the spring.

How TD Bank performed over the past year

TD Bank unveiled its first quarter 2021 results on February 25. The bank’s Canadian Retail division reported adjusted net income of $2.03 billion – up 12% from the prior year. Revenues rose marginally on the back of improved loan and deposit volumes, as well as higher transaction and free-based revenue in its wealth business. However, it did suffer due to lower margins as interest rates were curbed in the face of the pandemic.

Net income in its U.S. Retail segment dropped 13% year over year. Charles Schwab contributed $209 million in earnings to the segment combined with $201 million from TD Ameritrade. This week, the bank said that Schwab would contribute another $223 million to its earnings in the second quarter.

Overall, adjusted net income at TD Bank climbed to $3.38 billion or $1.83 per share – up from $3.07 billion or $1.66 per share in the previous year. Its exposure to the resurgent U.S. market is one of the main reasons I’m bullish on TD Bank in the quarters ahead.

Why I’m excited about its prospects in 2021

Canada has lagged its peers in the vaccine race, struggling to secure deliveries. Moreover, provinces have also faced challenges in delivering the vaccine to their citizens. We all hope that this will improve into the summer as Ontario was forced into its third lockdown over the past year. Canada’s economy is still on the rebound, which is why I’d suggested that investors should dip into bank stocks earlier this month. In my view, TD Bank stands above them all at this stage.

Meanwhile, the U.S. has charged ahead as a global leader with its vaccine rollout. It will grow into a leading vaccine exporter by the second half of 2021. This rollout has allowed the U.S. to pursue a rapid reopening across the country. The economy is expected to post a huge rebound in gross domestic product (GDP) in its next quarterly report. Indeed, Canada is expected to benefit from some of this spillover. TD Bank is the best positioned bank to receive a boost in this climate.

Should you buy TD Bank today?

Shares of TD Bank last had a price-to-earnings ratio of 12, putting it in favourable value territory relative to its industry peers. The bank last paid out a quarterly dividend of $0.79 per share, which represents a 3.8% yield.

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 Ambrose O'Callaghan owns shares of TORONTO-DOMINION BANK.

More on Investing

Hand writing Time for Action concept with red marker on transparent wipe board.
Dividend Stocks

Grab This 8.5 Percent Dividend Yield Before it’s Gone!

After witnessing 14% value erosion so far in 2024, the annual yield of this Canadian dividend stock looks even more…

Read more »

Increasing yield

3 High-Yield Dividend Stocks for Retirees

Top TSX dividend stocks are on sale.

Read more »

Aircraft wing plane

Should You Buy Air Canada Stock While it’s Below $18?

Air Canada (TSX:AC) stock is below $18. Should you invest?

Read more »

A plant grows from coins.
Stocks for Beginners

2 Ridiculously Cheap Growth Stocks to Buy Hand Over Fist in 2024

Are you looking for growth at a good price? These two growth stocks may be climbing but have far more…

Read more »

A worker gives a business presentation.

5 of the Best TSX Stocks to Buy in July

Are you ready to push some cash into the Canadian stock market? Here’s a well-rounded basket of five great companies…

Read more »

Payday ringed on a calendar
Dividend Stocks

This 7.7% Dividend Stock Pays Cash Every Month

Freehold Royalties is a TSX dividend stock that offers you a monthly payout and an attractive yield of 7.7%.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Tuesday, July 16

The TSX Composite Index has notched new record highs for three consecutive sessions, showcasing its upward momentum.

Read more »

Canada day banner background design of flag

3 Canadian Growth Stocks Everyone Should Own

These three stocks are excellent additions to your portfolio, given their solid underlying businesses and healthy growth prospects.

Read more »