Better Buy: TD Bank Stock or Scotiabank?

Let’s dive into whether Toronto-Dominion Bank (TSX:TD) or Bank of Nova Scotia (TSX:BNS) may be the better long-term bet.

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Choosing between top bank stocks like Toronto-Dominion Bank (TSX:TD) and Bank of Nova Scotia (TSX:BNS) involves considering various factors. Indeed, investors assessing any industry with very similar companies may note that there are more similarities than differences. However, assessing the financial performance, growth prospects, and overall stability of each bank can provide insights for investors looking at gaining stock-specific exposure to a sector.

Exchange-traded funds (ETFs) are great for passive investors looking to invest in a sector or entire market. But for those viewing 2024 as a stock-picker’s market, here’s my take on these two stalwart Canadian banks.

Toronto-Dominion Bank

Toronto-Dominion Bank is certainly one of the leading “Big Five” Canadian banks. However, this major Canadian financial institution is more than that, with a broad global presence, particularly in the U.S. market. Thus, TD Bank is often viewed as the preferable way for Canadian investors to gain exposure to the U.S. market and its higher-growth profile.

In addition to a strong domestic and global retail banking business, the company also provides a wide variety of other services, including corporate banking, wealth management, and other financial services. It also offers certificates of deposit, credit and debit cards, life and non-life insurance, international banking solutions, cash management, and investment advisory services.

My view is that TD’s diversified business model, combined with its incredible earnings growth reliability, positions the company well for long-term growth. If opportunities arise in the U.S. or elsewhere, TD has shown the willingness to invest when its peers won’t. That’s created a tremendous amount of value for investors in the past and is one of the key reasons why TD stock has outperformed most of its peers on a total return basis over the long term.

With a dividend yield of more than 5% and the potential for 5% capital appreciation annually, this is a stock I think can generate double-digit long-term returns for the patient investor. There’s a reason why this is a company with a market capitalization nearing $150 billion, and it’s a stock I think all investors should at least have on their radar.

Scotiabank

Incorporated in 1832, Bank of Nova Scotia has a long history of providing banking services across the world, including in Canada, Mexico, Central America, Chile, the United States, Colombia, Peru, etc.  Another one of Canada’s Big Five banks, it provides services such as wealth management, international banking, global banking and markets, and Canadian retail banking.

Scotiabank’s international focus (outside of the U.S.) again presents investors with an intriguing option. Scotiabank could be the most preferred option for those seeking exposure to high-growth Latin American financial markets. Thus, this is a Canadian bank stock I think has some of the best growth prospects of the bunch.

Notably, Scotiabank’s dividend yield of 6.8% and relatively low multiple compared to some of its peers also make this company a top dividend and value option as well. With strong recent earnings, it’s clear that Scotiabank stock also presents a compelling buying opportunity at current levels.

Bottom line

In my view, choosing between TD and Scotiabank is kind of like picking a favourite child. Each provides its own unique bull thesis, which is worth exploring.

That said, these two Canadian mega-banks have vastly different business models and do cater to specific investors. For those seeking better up-front yield and growth prospects, I think Scotiabank has to be the pick. However, for those seeking greater stability and U.S. exposure, I’d lean toward TD.

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 recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy.

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