Earning substantial returns from an investment portfolio, be it through ETFs, stocks, bonds, other securities, is a dream for every investor. Also, investors, especially the income-seeking ones, love dividends for a number of reasons.
For a TSX investor seeking a company that earns profits, has revenue and pays a dividend, I believe Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a compelling investment opportunity right now.
Biggest acquisition ever and profit tops estimates
TD Bank recently posted a rather impressive set of earnings for this past quarter. In addition to showing top-line growth of approximately 6% and bottom-line growth of 14% on a year-over-year basis, TD also made a big announcement.
The Canadian bank announced that it would be taking another set of steps in the U.S. market. This time, this deal is rather large, suggesting TD is intent on becoming a leader in retail banking in the United States.
The US$13.4 billion acquisition of First Horizon Corp. is a big deal, for a number of reasons. This deal further improves TD’s footprint in the U.S. southeast. A regional bank with a rather impressive footprint, First Horizon is what many analysts believe could be a stepping stone for TD to eventually dominate the U.S. banking market.
One of the key reasons many investors like TD is that this lender isn’t really a Canadian bank anymore. Most of the company’s locations are actually in the United States. Accordingly, this deal cements TD’s status as a truly international bank with an impressive growth profile.
An excellent dividend stock
Growth is great, and certainly a number of growth investors choose TD for this reason. However, it’s also important to consider that TD also has an excellent dividend yield.
Currently, TD stock pays investors a yield of 3.6%, a handsome yield relative to where bonds are trading right now. Over time, most expect this yield to increase, given TD’s historical track record. Over the past decade, TD has raised its dividend yield, on average, at more than 8%. Indeed, those looking to battle inflation have a lot to like about a growing yield like this.
Additionally, TD has a rather modest payout ratio of only 43%. This implies the bank not only has financial stability, but the ability to raise its dividend distribution over time. For long-term investors, that’s a great thing.
Bottom line
Toronto Dominion is the fifth-biggest bank based in North America in terms of assets. The company caters to over 26 million customers in three major businesses operating in multiple locations in financial centres globally.
Over time, I think TD has a unique growth profile among Canadian banks. This is a solid dividend player, with an excellent balance sheet as well. Those looking for a great long-term hold may want to look at TD stock at these levels.
