Canada’s big banks are among the best long-term investments on the market. But despite that long-term view, TD (TSX: TD), which is the second-largest of the big banks, has fallen to below $74 this year. Has TD stock finally bottomed out?
Let’s look at why TD stock has fallen, and whether it’s a good time to finally buy the bank stock.
What’s going on at TD Bank?
As of the time of writing, TD stock trades at just under $74 per share. Year to date, the stock has dropped 13% and, over the prior two years those losses show an 11% decline.
That’s hardly fitting of what is often regarded as one of the better long-term investments. And to be fair, nearly all the big banks show a loss over that same two-year period (thank you again, rising interest rates!), but none as steep as TD’s drop.
That’s because there are more than dismal market conditions that feed on inflationary pressures at play with TD stock.
That other issue is TD being the subject of ongoing investigations with U.S. regulators. That investigation is related to TD’s issue with identifying and reporting suspicious activities relating to money laundering.
So far TD has been fined over $9 million related to those activities. The bank has also set aside a whopping US$540 million to cover additional fines. Incredibly, that could still be just the tip of the iceberg. Some pundits see the final amount of those fines swelling into the billions before this crisis passes.
Looking ahead – Will TD recover?
To put things into perspective, TD has weathered pullbacks and market volatility countless times in its storied history spanning over a century. Each time the bank has emerged on a stronger footing, ready to expand.
In fact, in the period following the Great Recession, TD aggressively acquired several U.S. banks and stitched them together to form the core of its U.S. operations. Today that U.S. network stretches from Maine to Florida, with more branches in the U.S. than Canada.
It’s not hard to see TD flexing its financial muscle once again once the current climate passes. But it may take longer than some investors are willing to hang around for, which lends to the prolonged dip we’re seeing with TD stock.
Fortunately, there is a positive takeaway or two for current and prospective investors.
For prospective investors, the fact that TD stock trades at a significant discount right now is appealing. In fact, the last time TD traded at current levels was before the pandemic.
That dip in TD stock price has also swelled the bank’s dividend, which should prove appealing to both prospective and current investors.
As of the time of writing, TD’s dividend carries an appetizing yield of 5.52%, making it one of the better-paying bank stocks.
Final thoughts
No stock is without risk. Even TD, which is often regarded as one of the great defensive stocks to consider, has reminded us of this point in recent months.
What investors should keep in mind when considering TD stock is that investing is a long-term play. TD will recover, as it has during every crisis over the past century.
More specifically, once interest rates begin to drop (as they are expected to later this year), investors can expect some appreciation in stock price to occur.
Until then, TD remains a great buy at a discounted price and should be, in my opinion, a core holding to any well-diversified portfolio.
Buy it, hold it, and watch your investment grow.
