Could TD Stock Pick Up the Pace in 2023?

Here’s why I think Toronto-Dominion Bank (TSX:TD) stock could be an intriguing investment to own for 2023 and beyond.

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Canadians love their bank stocks. Whether it’s Toronto-Dominion Bank (TSX:TD) or one of its peers, this group is often a go-to for many investors when building out their portfolio. Accordingly, with TD stock actually declining over the past year, investors may wonder whether this stock can pick up the pace in 2023.

It’s a fair question. And over the very long term, most bank stocks (TD stock included) have provided market-beating total returns. Thus, one may confidently state that this dip is like all the others and should be bought.

That said, for those with a shorter investing time horizon, perhaps this isn’t the case. There are plenty of other great options out there to choose from. Thus, TD stock is now one of many higher-yielding investments to choose from.

Let’s dive in.

TD stock remains a top dividend option

There’s a lot to like about TD stock, both from a capital appreciation perspective as well as the company’s dividend yield. Indeed, in terms of total returns, this is a stock I think is worth owning for the long haul.

That said, the lender’s impressive growth to the largest bank in Canada in terms of total assets owned and the second largest in terms of market cap gives this dividend payer heft. Given the company’s impressive sector-beating growth rate in recent years, TD stock is a company with the size, scale, and profitability to support its current dividend yield of 4.2%.

Additionally, the company’s dividend-growth rate has continued to impress, with the company most recently raising its dividend by 8%. This is expected to continue so long as the company is able to continuously grow its earnings in the right direction.

TD’s recent earnings report hinted that this is likely the case. In its fourth quarter, TD reported 4% year-over-year (and quarter-over-quarter) earnings growth. This beat analyst estimates by 7%, and signaled much stronger-than-expected growth is possible in this environment.

Additionally, TD has announced a five-year community plan as a joint venture with the National Community Reinvestment Coalition (NCRC). The primary focus will be on offering lending, philanthropy, banking access, and other activities for the benefit of diverse communities. 

The future remains uncertain

Despite TD’s obvious value as a dividend player (and accretive grower over time), this is also a company that could underperform, if macro conditions deteriorate meaningfully. Thus, depending on whether we have a recession or not, TD stock could be a big-time underperformer or outperformer. Thus, right now, I think there could be more company-specific risk with this stock than we’ve seen in a while.

My view is that TD stock is likely to see some volatility on the horizon. Thus, for long-term investors looking to build a position, I think averaging in over a longer time frame (buying more shares on weakness) is a strategy that could work.

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 Chris MacDonald 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.

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