Canada’s Big Six banks are staple investments in many self-directed portfolios, especially for investors seeking long-term holdings. Canada boasts one of the strongest banking sectors worldwide. These companies have stood the test of time over a century and a half. The companies offer a reliable revenue stream, stable growth prospects, and juicy dividends.
While you can seemingly never go wrong investing in any of the Big Six, Toronto-Dominion Bank (TSX:TD) stock is an excellent pick for investors to consider right now. Today, I will discuss a few crucial reasons TD Bank stock warrants a place in your self-directed investment portfolio.
Massive international presence
For those familiar with it, TD Bank is the second-largest Canadian bank. However, not many Canadians realize that its banking network outside the country is actually larger than its domestic presence. Right across the border, this Canadian bank has become one of the largest banking networks operating in the U.S.
The Great Recession saw many financial institutions crumble throughout the United States. Due to the strength of the underlying businesses, Canadian bank stocks fared far better than their U.S. counterparts.
Amid the recession, TD Bank seized the opportunity to acquire several small regional banks in the U.S., consolidating them under its own banner. Fast forward to today, TD Bank has over 1,100 locations in the U.S., all the way from Maine to Florida.
Its diversified network offers TD Bank a degree of safety if domestic banking operations do not perform well.
Dividends galore
Another excellent reason to have TD Bank stock in your portfolio might be its impressive dividend history. TD stock has increased its shareholder dividends for over a decade. It has also been paying its investors their shareholder dividends since 1857. TD Bank was the first TSX stock to start paying investors their dividends — a tradition it has stuck to for over a century and a half.
Its reliable and virtually guaranteed dividends make it an excellent long-term holding. Besides the long-term wealth growth through capital gains, TD Bank stock is also an income-generating asset. Buying and holding shares in a Tax-Free Savings Account (TFSA) can help investors grow their wealth tax-free.
Foolish takeaway
The most important reason to consider investing in TD Bank stock right now is its share price. As of this writing, TD Bank stock trades for $80.49 per share, down by over 24% from its February 2022 all-time highs. The decline in its share prices, especially over the last 12 months, has given it an attractive 14 price-to-earnings ratio.
The series of aggressive interest rate hikes by central banks in the U.S. and Canada over the last year and a half have dragged share prices down across the board. However, higher interest rates should be good news for banks.
However, the development has led to a greater chance of loan defaulters. Due to a growing risk of defaults, TD Bank stock and its peers have been forced to increase provisions for loan losses, affecting their margins in the short term.
For long-term investors, the lower share prices mean a chance to add more of its shares to their portfolios at discounted rates and lock in higher-than-usual-yielding dividends.
