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

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

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

Doctor talking to a patient in the corridor of a hospital.
Dividend Stocks

1 U.S. Stock to Buy That Could Make You a Millionaire

Even though tech stocks are usually the go-to growth picks in the US stock markets, there are quite a few…

Read more »

Increasing yield
Dividend Stocks

My 3 Favourite TSX Dividend Stocks Right Now

These dividend stocks have been a favourite for a while, but even more so now that they trade at such…

Read more »

funds, money, nest egg
Dividend Stocks

New Investors: The 2 Best Options To Earn Regular Passive Income!

You can earn high passive income with dividend stocks like the Toronto-Dominion Bank (TSX:TD)(NYSE:TD).

Read more »

Dividend Stocks

This Canadian 6%-Yielder’s On Sale, But Not for Long!

SmartCentres REIT (TSX:SRU.UN) is a wonderful high-yielding REIT that has a higher yield and lower valuation than most its peers.

Read more »

A cannabis plant grows.
Cannabis Stocks

Why I’m Considering Canopy Growth Stock For My RRSP

As the cannabis industry grows, adding Canopy Growth stock to my RRSP will give me access to massive upside.

Read more »


Monthly Passive Income: Is RioCan a Buy for the 4.75% Yield?

RioCan raised the monthly distribution this year after cutting the payout during the pandemic. Should investors seeking monthly passive income…

Read more »

warning or alert

ALERT: 3 Cheap Stocks That Have Sent Off a Buy Signal

Canadians on the hunt for cheap stocks should snatch up CAE Inc. (TSX:CAE)(NYSE:CAE) and others that are technically undervalued right…

Read more »

grow money, wealth build
Top TSX Stocks

3 Canadian Growth Stocks for Your TFSA

Given their healthy growth prospects, these three stocks would be a good addition to your TFSA.

Read more »