Is Now the Right Time to Buy TD Stock?

Here’s why long-term investors may want to consider Toronto-Dominion Bank (TSX:TD) stock in this tumultuous economic period.

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With rising interest rates and a recession on the horizon, purchasing banking stocks can be a tough decision for investors. However, there are stocks of certain financial institutions which, even in this situation of uncertainty, can act as a valuable addition to investors’ portfolios. One of them is Toronto-Dominion Bank (TSX:TD). Investing in one of the world’s leading online financial services firms can be lucrative in the long run. 

Here are some reasons why. 

TD profits from rising interest rates

TD Bank has operations both in Canada and the United States. Thus, the rising interest rates coming from the Federal Reserve have an impact on TD stock to a greater degree than many of its peers. Paradoxically, these higher rates have the potential to translates into higher profits for TD. That’s because the bank is able to keep aside a significant portion of its deposits, which helps it cut down on its own expenses. 

As a result, its total net interest income in the first quarter (Q1) of 2023 grew to $7.73 billion, recording growth of 23% from the previous quarter year. From this, the bank set aside $690 million to offset its losses from loans, which helped in stabilizing its financial position. 

Toronto-Dominion Bank crosses quarterly profit estimates

As of Mar. 2, 2023, TD announced adjusted earnings of $2.23 per share, easily surpassing last year’s number of $2.08. Moreover, this value also beat the quarterly profit estimates of $2.20 per share.   

TD’s Personal and Commercial Banking business in Canada generated a net income of $1.7 billion in Q1 2023. This depicts a growth of 7% in comparison to the same quarter last year. The revenue generated by the bank’s Canadian units was $4.6 billion, which indicates an appreciation of 17%.     

Along with this, Toronto-Dominion’s U.S. division also generated a net income of $1.6 billion, or 25% growth over the same quarter last year. Furthermore, the company has seen year-over-year growth in both personal and business loans, each growing at 11% and 6%, respectively. 

Toronto-Dominion declares another dividend

This previous earnings report also came with a dividend announcement. On Mar. 3, the company announced a dividend of $0.96 for each fully paid common share in its capital stock. The payments will be disbursed on or after April 30, 2023, and shareholders on record as of April 6, 2023, will only be applicable for it. Stockholders may choose to reinvest their dividends in exchange for the bank’s additional common shares. 

Bottom line

TD stock remains among the top Canadian equity investment opportunities right now. This is a company that’s provided solid growth over the years, alongside a stable and meaningful dividend yield. In any portfolio, TD stock is worth a look.

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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