TFSA (Tax-Free Savings Account) investors may wish to consider some of the many beaten-down dividend stocks to get a shot at more passive income for a lower price. Undoubtedly, the bank stocks have been hit incredibly hard, thanks in part to a few bank failures in the states. Regional banks were a sore spot on the broader financial markets for a big chunk of March. The sore spot spread across international markets, as appetite for banks as a whole took a slide.
The Canadian banks felt the rumbles from the U.S. banking turmoil. Some banks, like TD Bank (TSX:TD) and Bank of Montreal (TSX:BMO), were hit harder than others due to their exposure to the U.S. banking scene. Others, like National Bank of Canada (TSX:NA) held relatively steady due to their lack of exposure to the U.S. market.
The bank stocks get rocked in March, but things are settling!
With a strong rally in the back half of March, it seems like the bank fears are finally starting to settle down. Thanks to backstops and quick action from federal regulators, confidence in the broader basket of banks seems to be improving by the day.
Indeed, the hard-hit banks have begun to march higher again as a part of the market’s latest win streak. Those TFSA investors who braved the chaos are now sitting on a nice weekly gain. Those who haven’t yet punched their ticket may be kicking themselves for not buying the dip. That said, I still think the risk/reward scenario to be had at today’s prices is still quite attractive, especially for TD and BMO stock — two U.S.-heavy Canadian bank stocks.
Between BMO and TD, I’m a bigger fan of the latter at these valuations.
TD Bank: A great TFSA passive-income pick
Don’t look now, but TD stock is up more than 7% from its late-March low. Indeed, banking fears got a tad out of hand, and when shares of TD hit a strong level of support at around $77 and change per share, I couldn’t help but pound the table on the name. Shares were timely, but the window to buy the dip closed quite quickly as banking fears eased. You had to buy at a point of maximum pessimism to catch TD stock at the bottom, though.
Despite the nice gain for TD over the past week, I still view the name as timely, as shares look to recover further. Like it or not, TD stock is still down a great deal from its 52-week high of $100 and change and its all-time high just shy of $108 per share.
The rear-view mirror is still quite bearish. Down around 23% from its peak, with a bit of momentum behind shares, I like TD Bank stock for the rest of the year while its dividend is still north of 4.5%. Today, it’s at 4.74%. Though a pullback would be ideal, I’m unsure the stock will revisit its 52-week lows, given the easing of fears resulting from the failure of SV Bank.
Looking ahead, we’ll see what TD does with its pursuit of First Horizons, which isn’t going to close in May. I think that’s a good thing, and I hope TD can negotiate better terms given the circumstances. Ultimately, it’ll depend on how quickly regional banks recover from the banking scene’s March madness. If it’s quick, the original price may be the lowest First Horizons will go.
