TD Bank (TSX: TD) stock is one of the bluest Canadian blue chips, but in recent years, shares have been underperforming, with the stock down more than 15% in the past two years and virtually flat (up around 4%) over the past five years.
Sure, the dividend payments have been steadily flowing in (a nice 5.21% dividend yield at writing), and I’m sure they’ve been appreciated by seekers of passive income. That said, it’s hard to imagine many young investors sticking with the big Canadian bank stocks, like TD, with a lack of upside momentum.
TD Bank stock has been consolidating for a few years now, seemingly stuck around the $80–83 range. And with plenty of headwinds that could eat into earnings over the quarters ahead, questions linger as to whether TD stock is still deserving of a spot in one’s TFSA income fund.
Indeed, the lack of momentum may make TD stock less appealing to beginner investors, many of whom want to cash in on the hot tech trend of the day. That said, with markets slipping for the month of April, it may be the market’s dogs that rise up as most of the “sexy” trade plays begin to crumble. While TD Bank doesn’t have many catalysts going for it in 2024, I do think that continued efforts to bolster the long-term thesis remain in play.
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TD Bank is on the right track long-term
Most notably, TD Bank’s managers have continued to invest a considerable sum in digitization. In order to attract a new generation of young consumers, the big banks must adapt and digitize their services. Though TD has kept up stride for stride with some of the biggest innovators in the financial scene, I don’t expect such efforts to pay off considerably overnight.
Over the next decade and beyond, however, big bets on intuitive mobile apps and even AI-powered chatbots could lead to steady appreciation as the banks hit back at the many fintech disruptors that are using tech as an advantage.
One thing TD stock has going for it, though, is the depressed valuation and low expectations ahead of coming quarters. At 12.4 times trailing price-to-earnings, you’re getting one of the best-run banks in the country. With great tech talent and a budding U.S. retail banking business, long-term investors (especially those who want passive income) have a lot to love about the firm, even as the consolidation continues for a while longer.
TD Bank finally gets a big upgrade from a fellow Canadian bank
Recently, TD Bank stock got a nice upgrade (to sector outperform from sector perform, the equivalent of Buy from Hold) courtesy of Scotiabank (TSX: BNS) analysts. As a part of the upgrade note, Scotia’s Meny Grauman stated most of the U.S. regulatory concerns are already baked into the stock. I have to agree. There are just far too many headwinds weighing on the stock right now. If one happens to fade, TD stock may just have what it takes to rally again.
All considered, TD stock looks like one of the safer dividend stocks in the market right now, even if the economy is poised to drag for another year or longer.
