Could This Undervalued Stock Make You a Millionaire One Day?

Looking for an undervalued stock you can buy today and hold for decades? Here’s a great pick with a generous dividend.

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There’s no shortage of great stocks on the market that currently trade at a discount. But could an undervalued stock give you a comfortable retirement or even make you a millionaire?

Let’s look at one undervalued stock that is an insane opportunity right now.

Big bank weakness = big bank opportunity

Canada’s big banks are almost always regarded as some of the best long-term options to consider buying.

There are a few great reasons for that view. First, they are backed by a strong, mature, and stable domestic market. This allows the banks to invest in growth, which comes in the form of international expansion. And finally, that stable revenue and investment in growth allow the banks to pay out a generous dividend.

That doesn’t sound like the definition of an undervalued stock, but that’s exactly what Canada’s second-largest bank, Toronto-Dominion Bank (TSX:TD) is right now.

TD’s Canadian bank segment posted an impressive $1.7 billion in net income in the most recent quarter. This represented a 7% increase over the same period last year.

TD’s international presence is focused on the U.S. market. In that market, TD boasts a network of over 1,100 branches stretching along the east coast of the U.S. from Maine to Florida. That segment reported net income of $580 million in the most recent quarter, which was a whopping 59% decrease over the prior period.

One of the main reasons for that sizable drop was the bank setting aside funds related to ongoing investigations in the U.S. Those investigations stem from allegations relating to TD’s ability to identify and report on suspicious activities.

Depending on the outcome of the investigation, TD could be on the hook to pay out what could be sizable fines. So far the bank has been fined $9 million, but the final amount could be in the billions.

TD has so far set aside a whopping US4.5 billion for those additional fines. More importantly, the disposition of those investigations and the final amount of fines imposed could shutter TD’s U.S. growth for a period.

Here’s another reason to consider TD

As of the time of writing, TD trades at a P/E of just 12.4, just a few cents over its 52-week low. Year-to-date the stock is down 12%.

While we wait out the results of the ongoing investigation, prospective investors have yet one more reason to consider TD – the bank’s juicy quarterly dividend.

As of the time of writing, TD currently pays out a very attractive 5.5% yield. This not only makes it one of the better-paying options among its big-bank peers, but also an attractive buy-and-forget candidate.

This can prove appealing for both long-term investors as well as income-seeking investors. And keep in mind that those investors who aren’t ready to draw on that income yet can choose to reinvest it until needed.

This allows any eventual income to continue rising through reinvestments and from TD’s established annual dividend uptick.

Should you buy this undervalued stock?

No stock, even the most defensive can be truly without some risk. TD is a great example of this as an otherwise low-risk stock with plenty of long-term potential.

What prospective investors need to keep in mind is that investing in TD is a long-term play. The bank has endured countless drops in its storied history that spans well over a century. And more importantly, the bank has emerged with strong growth prospects each time.

Prospective investors can take solace in knowing that TD is an undervalued stock which won’t stay undervalued forever. More importantly, TD pays out a handsome dividend that investors can enjoy while the stock recovers.

In my opinion, TD is a superb long-term option that should be a core holding in any well-diversified portfolio

Buy it, hold it, and enjoy the juicy dividend while the stock price recovers.

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 Demetris Afxentiou has positions in Toronto-Dominion Bank. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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