Should You Buy the Dip in TD Bank Stock?

Canadian stocks were throttled to start the week. Investors should consider buying-the-dip in TD Bank (TSX:TD)(NYSE:TD) today.

| More on:
hand using ATM

Image source: Getty Images

The S&P/TSX Composite Index dropped 259 points on July 19. North American markets ran into major turbulence to open the week. The financials space suffered a 1.9% retreat. Canada’s big banks have built significant momentum after the sharp market dip in 2020.

However, this latest bout of turbulence has eaten into those gains. Today, I want to discuss whether Canadians should look to buy the dip in TD Bank (TSX:TD)(NYSE:TD). Let’s dive in.

Should investors be worried about the Delta variant?

Some analysts and economists speculated that recent volatility stems from concerns over the rise of the COVID-19 Delta variant. Even countries with a high proportion of fully vaccinated citizens, like Israel, are starting to experience a shock due to the rise of this variant.

The United States, which started out very well with its early vaccine rollout, has started to plateau. Political leaders have taken aim at vaccine skepticism, but large swaths of the population remain steadfast.

Canada is nearing the 50% fully vaccinated mark. However, health officials are closely monitoring the spread of the Delta variant. This could threaten what has been a promising recovery so far. Indeed, investors should still be optimistic especially given Canada’s improved vaccine record. Today, I want to look at a top bank stock to buy on the dip.

Why TD Bank looks great after the first half of 2021

TD Bank is the second-largest Canadian financial institution. It boasts a huge footprint in the United States, which makes it stand out among its peers. Shares of TD Bank have dropped 6.5% month over month as of close on July 19. The stock is still up 13% in the year-to-date period.

Back in April, I’d discussed why TD Bank was my favourite bank stock. Its exposure to the U.S. economy was one of the main reasons I’d recommended the top bank stock. TD Bank’s stock would go on to achieve a 52-week high by the end of May.

The bank released its second-quarter 2021 results on May 27. Like its peers, TD Bank delivered strong results in the first half of the year. Adjusted net income came in at $3.77 billion or $2.04 per share – up from $1.59 billion or $0.85 per share in Q2 2020. In the year-to-date period, adjusted earnings rose to $7.15 billion or $3.86 per share – up from $4.67 billion or $2.51 per share the same time last year.

Net income in Canadian and U.S. retail soared 86% and 292%, respectively, compared to the second quarter of 2020. Canadian and U.S. retail banking net income received a boost as the bank drew back on its provisions for loan losses. Wholesale banking net income climbed 83% year-over-year to $383 million.

The case for buying TD Bank today

Shares of TD Bank possess a favourable price-to-earnings ratio of 10. The bank last paid out a quarterly dividend of $0.79 per share. That represents a 3.8% yield. It had an RSI of 25 at the time of this writing, which puts the stock in technically oversold territory.

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 has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Investing

money cash dividends
Dividend Stocks

TFSA: 3 of the Best Canadian Dividend Stocks to Buy This Year

Are you looking for some of the best Canadian Dividend stocks to buy this year? Here are three great options…

Read more »

Golden crown on a red velvet background
Energy Stocks

3 Canadian Dividend Aristocrats to Buy and Hold for Passive Income

Are you seeking safer options amid elevated market volatility? Consider these three Canadian dividend aristocrats to receive uninterrupted passive income…

Read more »

Group of industrial workers in a refinery - oil processing equipment and machinery
Energy Stocks

Suncor Energy Stock: Has it Bottomed Out?

Suncor Energy Inc (TSX:SU) stock has been falling lately. Has it bottomed out yet?

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Stocks for Beginners

2 Top Stocks to Buy in February 2023

Here are two of the best Canadian stocks you can buy in February 2023.

Read more »

Aircraft wing plane
Investing

Bombardier Stock: Should You Invest in the Current Bullish Trend?

Capturing a bullish trend from beginning to end is an exception, not the rule. In most cases, you will only…

Read more »

A worker uses a double monitor computer screen in an office.
Investing

1 Top TSX Stock to Buy as Tech Makes a Rebound

Shopify (TSX:SHOP) stock is a great e-commerce gem to buy and hold for the long run, as shares look to…

Read more »

A worker wears a hard hat outside a mining operation.
Metals and Mining Stocks

Cameco Stock Is Approaching its 52-Week High: Time to Invest?

Cameco (TSX:CCO) stock is nearing 52-week highs once more after falling from September last year, but should you wait for…

Read more »

edit Person using calculator next to charts and graphs
Investing

For a Carefree Retirement, 3 Careful Stock Ideas

The right stocks can help you build a retirement nest egg that ensures a financially stable and carefree retirement.

Read more »