TD Bank Stock Looks Too Good to Pass Up!

TD Bank (TSX:TD) stock is a dividend stud that’s ending 2022 at a very modest multiple.

| More on:
Piggy bank next to a financial report

Image source: Getty Images.

It’s hard to put new money into the market, as investors find themselves between a rock (inflation and a bear market) and a hard place (a looming recession). Indeed, some years are more challenging than others to invest through.

Many beginner investors may ask themselves what the point of investing through the tough times is. Indeed, avoiding the bad times and investing through the good days seems like a far better bet. Unfortunately, those who seek to avoid the big down days tend to also steer clear of the best up days.

Volatility is a two-way street. It goes in both directions, and if you sell after a particularly bad day, odds are you’ll miss on a sizeable up day. By suffering through the bad days while missing out on the swift recovery days, your job of beating the market will be made that much harder.

Beginner investors: Staying the course with solid blue-chip stocks

Many market newcomers will find that by reacting after bad days (by selling stocks), they’ll miss out on unexpected, good days that follow. Even when it seems like nothing can send markets higher, markets can surprise to the upside and for no real good reason (perhaps oversold conditions). That’s why selling in late-stage bear markets can be a pretty risky move for young investors that have many years to stay invested.

Now, you don’t need to brave the market turmoil by going for growth stocks. However, you should think about nibbling away at the quality, blue-chip stocks you would have bought in times when markets were in a steady upward trend. Bears and bulls don’t live forever. But it sure seems that way after around a year of either a bull or bear market!

TD Bank stock: Bargain hunting in the U.S. market

In this piece, we’ll draw attention to shares of TD Bank (TSX:TD). The Big Six heavyweight has been one of the most active of the batch over the past two years, picking up Memphis-based bank First Horizons and small indie investment bank Cowen. Indeed, the latter name is well known for its analysis and recommendations on individual stocks.

TD is in full-on growth mode, even as headwinds move in. I’m a big fan of management’s long-term focus and think that of all the Big Six Canadian banks, TD has improved itself the most over this pandemic period.

Indeed, every acquisition comes with its share of risks. Overpay for a deal and an acquirer’s shares will be met with punishment. Given the timing of its First Horizons and Cowen deals, I think TD got a reasonable deal. If TD integrates the assets effectively, I think TD could extract considerable value from both deals. Both names give TD that much more power in the U.S. market, which has served as a terrific growth outlet for the Canadian bank.

TD stock: Too good a deal for dividend investors

At this juncture, investors are too focused on the recession to come. TD will take a hit to loan growth, just like other banks. As the tough times pass, though, expect TD to return to its old form. Investors can expect generous dividend growth and capital gains over the long haul.

At writing, TD stock trades at 9.24 times trailing price-to-earnings alongside a slightly swollen 4.4% yield. Historically, TD is a bargain. But do be warned: 2023 will be a rocky year. And the currently depressed valuation implies a good chance of a recession.

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 has positions in Toronto-Dominion Bank. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Bank Stocks

question marks written reminders tickets
Bank Stocks

Is CIBC Stock a Buy in February 2023?

CIBC stock is down 25% in the past 12 months. Is now the time to buy?

Read more »

stock research, analyze data
Bank Stocks

Better Buy: TD Stock or Bank of Nova Scotia?

TD Bank and Bank of Nova Scotia still look cheap. Is one a good buy today?

Read more »

edit Four girl friends withdrawing money from credit card at ATM
Bank Stocks

2 Top TSX Bank Stocks to Buy in February 2023

Here's why Toronto-Dominion Bank (TSX:TD) and Bank of Nova Scotia (TSX:BNS) are two top TSX bank stocks to consider right…

Read more »

grow money, wealth build
Bank Stocks

TFSA Investors: A Big Bank Stock That Pays Almost 6% in Dividend Income

A Big Bank stock is an ideal core holding in a TFSA, not only for its financial stability but also…

Read more »

Target. Stand out from the crowd
Bank Stocks

BMO Stock looks Better Than its Peers in January 2023

What's next for BMO stock after a downfall in 2022?

Read more »

Bank sign on traditional europe building facade
Bank Stocks

As Banks Expand South of the Border, Which Is the Better Bet for Growth?

Canada’s big banks are expanding into the U.S. market. Here’s a look at which of these titans is a better…

Read more »

Young woman sat at laptop by a window
Bank Stocks

Could BMO Stock Be a Big Winner in 2023?

Long-term investors should take a closer look at BMO stock as a potential core holding, especially on dips.

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Tech Stocks

TFSA Passive Income: How I’m Investing to Make $2,000/Year From Dividends

I am increasing my dividend income by investing in dividend stocks like the Toronto-Dominion Bank.

Read more »