I Keep Buying Shares of This Dividend Stock Hand Over Fist

I have been buying shares of Toronto-Dominion Bank (TSX:TD) hand over fist for years.

| More on:

Image source: Getty Images

Every now and then, you find a stock that you can’t get enough of — a stock that, even though you’ve already bought a lot of it, makes you want to continue buying more. These stocks aren’t seen often, but when you find them, you have a rare opportunity in front of you.

In this article, I will share one TSX stock that I keep buying hand over fist.

TD Bank

Toronto-Dominion Bank (TSX:TD) is a Canadian bank. It’s the second-biggest bank in Canada by market cap and the biggest by total assets. TD has grown faster than other Canadian banks over the last decade because of its strong competitive position. It has a strong brand, being consistently voted one of Canadians’ favourite banks. It also scores well in on customer satisfaction in the United States. In its most recent quarter, TD Bank achieved positive earnings growth — something that not all banks were able to achieve in the same period. It was a strong showing for TD, which could keep delivering solid results in the future.

A moderate valuation

One big thing TD has going for it right now, apart from the earnings beats, is a moderate valuation. It is not cheap by banking standards, but it is cheaper than the markets as a whole, boasting ratios like

  • 10.75 times earnings;
  • 3.6 times sales;
  • 1.63 times book value; and
  • 4.41 times operating cash flow.

Apart from the price-to-sales ratio, these are all pretty low. Basically, when you buy TD Bank stock, you’re only paying for about 11 years’ worth of earnings. This is a better deal than you’ll get with most stocks in the market today. The fact that TD is growing (earnings increased about 5% last quarter) only adds to the thesis that it is relatively cheap.

Two big deals coming up

Another exciting thing about TD Bank right now is the fact that it has two big deals in the works.

The first is the well-publicized deal to buy First Horizon (NYSE:FHN). FHN is a U.S. retail bank in the southeast that does about a billion a year in revenue. It is situated in one of the fastest-growing U.S. markets. The south in general is seeing more population growth than the north right now, and that’s where TD wants to be. TD was criticized for offering a high price for FHN, but with FHN’s earnings growing, the price doesn’t look as high as it initially did. Also, TD thinks it can help FHN save about $600 million a year in costs after it closes the deal.

The second deal TD is working on is Cowen (NASDAQ:COWN). Cowen is a U.S. investment bank that does about US$128 million a year in revenue. Investment banking isn’t really in a great place right now. Banks make money taking companies public via initial public offerings, and not that many companies are choosing to go public in this turbulent stock market. It is what it is. On the bright side, TD is acquiring COWN at a much lower price-to-earnings ratio than FHN. Also, the deal doesn’t need as many regulatory approvals to close compared to the FHN deal.

Overall, things are looking bright for TD Bank. It’s profitable, it’s growing, and it’s not even that expensive. I’ll continue to buy this dividend stock for years.

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 Andrew Button 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

Hourglass projecting a dollar sign as shadow
Bank Stocks

Is Now Actually the Perfect Time to Purchase TD Bank Stock?

TD stock looks cheap today. Should you buy or wait?

Read more »

Bank sign on traditional europe building facade
Bank Stocks

The Canadian Bank Stock I’m Buying in This Banking Shakeup

Investors can increase their wealth by buying quality dividend stocks like TD when it's on sale now and holding it…

Read more »

Technology
Bank Stocks

Better Buy: Bank of Montreal Stock or National Bank?

Bank of Montreal (TSX:BMO) and National Bank (TSX:NA) are Quebec-based bank stocks that deserve your attention.

Read more »

TIMER SAYING TIME FOR ACTION
Dividend Stocks

TFSA: 3 Value Stocks to Buy in April

The March dip is a synopsis of the mild recession banks anticipate as high interest rates trickles down. It is…

Read more »

edit Colleagues chat over ketchup chips
Tech Stocks

2 Easy TSX Stocks for Beginners in April 2023

You don’t need to think twice about loading up on these two Canadian stocks in April.

Read more »

edit Taxes CRA
Stocks for Beginners

How I’m Using My RRSP This Tax Season

Don't dismiss what you can make from your RRSP this year and every year, especially if you invest in a…

Read more »

worry concern
Bank Stocks

Should You Be Worried About CIBC Stock?

CIBC stock fell more than 10% in March, as the U.S. bank collapse sounded an alarm. Should you be worried…

Read more »

stock research, analyze data
Energy Stocks

Better Buy in April 2023: Bank Stocks or Energy Stocks?

Bank stocks and energy stocks are some of the most sought-after assets, but which is the better buy heading into…

Read more »