Why This TSX Stock Will Always Do Better Than a Growth Stock

This TSX stock will always be a better buy, with the means to make you money in a consistent manner that’s far easier to achieve than a growth stock.

| More on:
Make a choice, path to success, sign

Image source: Getty Images

When it comes to investing, investing for the long term is always better. Sure, you might think that you’ll find the next growth stock and become a millionaire overnight. But not only are the odds of that happening slim, but you could also achieve it far easier in a much more stable TSX stock.

Today, I’m going to look at one stale TSX stock I would recommend — one that all but guarantees you’ll achieve wealth in the long run, instead of risking your hard-earned cash on a growth stock.

Let’s look at the stock in question and pair it with a growth stock like Amazon (NASDAQ:AMZN) to see how it does.

TD stock

If you’re looking for long-term investment, then I would go with a Big Six bank. These banks have more conservative growth than their United States counterparts, and that’s a good thing. This is because that conservative growth allows them to put cash aside for provisions for loan losses.

Those provisions are being used right now by the Big Six banks with loan originations down across the board. This comes, of course, from rising interest rates and inflation leading Canadians to take out fewer loans.

But of all the banks, I would go with Toronto Dominion Bank (TSX:TD) right now. This bank has a long history of stellar growth, true. But it also has a huge future of growth as well. TD stock is making stellar partnerships with credit card companies and expanding into the United States and online at a rapid pace.

What’s more, it has a number of loan repayment options and plans for any Canadian at any point in their financial journey.

Looking back

Now, let’s look at the past 20 years and see how TD stock has done. You can see in the table below that shares started out at about $17 back in 2003. Today, those shares are at $93.23. Even with dips in the market during recessions, those shares are still up 1,092% in two decades!

Let’s look at Amazon stock during that time. Shares started out at $1.25 and are now at $102. That’s growth of 9,280% — certainly higher than TD stock.

But there’s something else here

If you look at TD stock and Amazon stock, you’ll see that shares are far more stable at growing than with Amazon stock. It took decades for the company to achieve incredible growth, and much of it has come down in the last few years alone.

Meanwhile, TD stock has remained on a fairly stable trajectory. In fact, in the last three years TD stock is up 39%, but Amazon stock is down 4%. And if you’re investing your money, you’ll certainly want stability over sudden, insane growth, because sudden growth means volatility.

What it comes down to is we don’t know what Amazon stock will be doing in the future. However, we do know what TD stock will be doing. It currently has a compound annual growth rate (CAGR) of 13% from the last 20 years, which is likely to continue. Meanwhile, Amazon stock has a 25% CAGR in that time, but that’s dropped to 8% if we look at the last five years.

Furthermore, Amazon stock doesn’t have a dividend! TD stock offers a 4.14% yield that you get no matter what — yet another reason to consider the stock.

Bottom line

If you’re investing in a TSX stock, choose a company that you’re going to be happy with for decades — not just a year or two. Because while we’d like to think we’ll find that next big company, there’s no telling what will happen, and certainly no telling when you might need to sell.

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.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Amy Legate-Wolfe has positions in Toronto-Dominion Bank. The Motley Fool recommends Amazon.com. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Dividend Stocks

Better Buy for TFSA Passive Income: Telus Stock or TD Bank?

Telus stock and TD stock look cheap today. Is one really oversold?

Read more »

funds, money, nest egg
Dividend Stocks

Income Stocks: A Once-in-a-Decade Chance to Get Rich

As a part of your diversified investment portfolio, solid dividend stocks on sale can help you get rich with growing…

Read more »

Hourglass projecting a dollar sign as shadow
Dividend Stocks

2 Superb TSX Stocks to Buy for Passive Income

All dividend stocks can help you start a passive-income stream, but relatively few offer a healthy combination of yield and…

Read more »

A golden egg in a nest
Dividend Stocks

TFSA Investors: 2 Growth Stocks to Build an Adequate Nest Egg

Two TSX growth stocks are ideal holdings for TFSA investors building a nest egg or retirement wealth.

Read more »

financial freedom sign
Dividend Stocks

How to Easily Make $1 Million in 20 Years

There's trying to time the market, and then there's the easy way of investing if you want to make $1…

Read more »

Dividend Stocks

Top TSX Stocks to Buy to Prepare for a Recession

Here are two TSX stocks to consider that could offer immense portfolio stability in an economic downturn.   

Read more »

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

2 of the Best Canadian Stocks That Pay Out Monthly

These two Canadian dividend stocks are some of the best to buy, offering yields upwards of 5.4% and returning cash…

Read more »

clock time
Dividend Stocks

How Investors Can Build a $1 Million Portfolio in 12 Years

If you can handle it, you can certainly create a million-dollar portfolio in just 12 years, especially considering this dividend…

Read more »