Down 19.62%: Is TD Stock a Buy Right Now?

Consider investing in Toronto-Dominion Bank stock, despite the financial giant’s decline from its significant 52-week high.

| More on:
sad concerned deep in thought

Image source: Getty Images

Canada’s bank stocks have historically been some of the most reliable long-term assets for Canadian investors. Whenever major economic issues arise, bank stocks are also the first to stumble and decline on the stock market. The tumultuous 12 months in 2022 already showed stock market investors what can happen to bank stocks. Many of the biggest names declined by up to 15% from their all-time highs.

Toronto-Dominion Bank (TSX:TD) is one of the Big Six Canadian bank stocks that I will focus on today. As of this writing, TD Bank stock trades for $87.67 per share. At current levels, it is down by almost 20% from its 52-week high. Let’s look at whether it can be a good addition to your portfolio right now.

How Toronto-Dominion Bank ended fiscal 2022

The Big Six are all fundamentally strong financial institutions and have been around for a long time. Between long-term capital gains and reliable shareholder dividend payouts, these bank stocks have made many Canadian stock market investors wealthier over the decades.

Earnings growth has slowed for some of the Canadian banks in the fourth quarter of fiscal 2022, while others were busy increasing provisions for loan losses. Considering persistent inflation and further interest rate hikes in the coming months, the provisions will likely remain high for the next few quarters.

The quarter saw TD Bank report a 22% growth in its net income, hitting the $17.4 billion mark. Its average deposit volumes also improved by 4% from the same period in the previous year. The real kicker is that its common equity tier-one (CET1) ratio was around 16.2% at the end of October 2022, putting it higher than regulatory requirements and beyond the industry average.

The last decade has seen TD Bank grow its earnings at an impressive 9% annually. It also boasts an average of 15% return on equity in that time. The stability in its earnings growth reflected its stock’s performance. TD Bank stock delivered at a 13% compound annual growth rate in that time, going beyond the Big Six average of 11.5%.

TD Bank increased its dividend payout by 8% after ending the fourth quarter of fiscal 2022. As of this writing, it boasts a juicy 4.38% dividend yield and a manageable 37.59% payout ratio. With its U.S. banking segment growing rapidly compared to its domestic operations, TD Bank looks well positioned to improve its bottom line, despite troubles in the local economy.

If we see any improvements in the second half on the inflation front, it may be able to reduce its loan loss provisions to further improve its financial position.

Foolish takeaway

I will not outright call TD Bank stock better than its closest peers. With the targeted inflation level still a distance away, further interest rate hikes will negatively impact all bank stocks, including TD Bank.

It is possible for TD Bank stock’s growth to slow down further and its share prices to decline in the short term. However, it looks attractive as a long-term investment, considering its strong financial position and reliable dividend payouts.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Business people standing near houses models
Dividend Stocks

Why Canadian Apartment Properties REIT Notched a 15% Gain in January 2023

CAPREIT may not look like a deal at the outset, but long-term growth projections would disagree – especially when considering…

Read more »

edit Businessman using calculator next to laptop
Dividend Stocks

1 Oversold Dividend Stock (With a 8% Yield) I’m Buying Right Now

Real estate investment trusts Northwest Healthcare offers investors a tasty dividend yield of almost 8%.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

2 Recession-Resistant Stocks to Buy for Steady Gains in 2023

Investors worried about a recession can look to buy utility stocks such as Hydro One and Waste Connections right now.

Read more »

Dial moving from 4G to 5G
Dividend Stocks

Down by 15%: Is BCE Stock a Good Investment in January 2023?

Few companies are truly “too big to fail,” but most market leaders are far more resilient against market headwinds or…

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Dividend Stocks

Looking for $200/Month in Alternative Income? Buy 530 Shares of This Stock

Do you want to earn $200 monthly alternative income for the next few years? Then accelerate your investments in this…

Read more »

Dividend Stocks

Deadline Coming: 3 TFSA Stocks to Buy Now Before Dividend Payouts

Invest in RNW stock and 2 other TFSA friendly names before this fast-approaching deadline to get the full 2023 dividend.

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Passive Income: How to Earn Nearly $367 Per Month in Your TFSA Portfolio

Top TSX dividend stocks now trade at discounted prices for TFSA investors seeking passive income.

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Dividend Stocks

3 Stocks I’d Buy — But I’m Waiting for a Dip

After the recent bounce, It may be smart for investors to wait for a dip before they buy these solid…

Read more »