Toronto Dominion Bank (TSX: TD) has had a rough go so far in 2024. TD stock may be one of the biggest companies and banks in Canada, and even in the United States. However, that won’t matter if everyone is worried about money laundering probes.
That’s why today we’re going to look at whether TD stock is worth the buy. After all, it still remains one of the Big Six Banks in Canada. And one of the top 10 banks in the U.S. But with real fear over money laundering probes, is it the best choice?
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What happened
Shares of TD stock fell to a 52-week low as the company was hit with a $9.1 million fine. This came as regulators found that it failed to report suspicious transactions. In fact, at least one TD employee was taking briberies.
Furthermore, this is only the tip of the iceberg. The United States Department of Justice is still investigating similar issues at the time of writing this article. It’s investigating the bank’s ties to a US$653 million drug money-laundering case in New York and New Jersey. The probe is focused on Chinese crime groups using TD and other banks to hide money from fentanyl sales in the U.S.
The worst-case scenario out of this is perhaps billions in charges. What’s more, it could enter a “lost decade” in the words of one analyst. Growth for the company in the U.S. would be tempered during this time, and that could send the stock back over the next few years.
Is it safe?
The key, however, for investors seeking TD stock as a dividend stock is whether the dividend is safe. And that’s unclear at this point, to be honest. The bank could pay about US$2 billion to regulators, and that money will certainly hurt the stock.
However, the stock has also lost about $10 billion in market capitalization since the report about suspicious transactions came out. And the company has always managed to keep provisions to the side – though usually for loan losses.
Therefore, it’s unlikely that a bank as large as TD will cut its dividend to make up for these probes. Instead, the bank could be seen as a deal. But I would say that would only be for investors looking at TD stock as a long-term hold.
A deal on a dividend
So if you’re into TD stock for a long-term position, now does look like a great time to buy it while it’s down. TD stock continues to offer a strong business model, strong margins, and a diverse presence both in Canada and the U.S. That isn’t going to disappear overnight.
Furthermore, it’s still one of the safest stocks you can buy thanks to its size alone. And it currently trades at a fairly valued 12 times earnings at the time of writing.
So with a dividend yield at 5.4%, far higher than its five-year average of 4.2%, TD stock could be a great deal for long-term investors willing to wait out this current storm.
