There’s no shortage of great dividend stocks on the market. And during this weird, if not volatile year we’ve had so far, some are faring better than others. Fortunately, there is one dividend stock down nearly 5%, which is an ideal candidate for investors to consider now.
That dividend stock to consider buying right now is Toronto-Dominion Bank (TSX:TD), and here’s why.
Canada’s big banks are great options to consider
TD is the second largest of Canada’s big banks and, historically, those banks are seen as some of the best long-term options for investors to buy.
There are more than a few reasons for that view.
First, the banks generate a reliable revenue stream from a stable, mature domestic market at home. It’s no secret that the big banks have the overwhelming majority of the domestic banking sector well covered.
This provides a generous and growing source of revenue for the banks, which allows them to pay out a generous dividend and invest in growth. In the case of TD, the bank posted earnings of $1.9 billion from its Canadian banking segment in the most recent quarter.
That represents a whopping 13% uptick over the same period last year. More importantly, that comes despite the bank posting an overall $181 million net income loss for the quarter.
Much of that loss was attributed to TD’s U.S. segment. In the most recent quarter, the segment posted a net loss of $2.5 billion. A key reason for that is TD setting aside massive amounts ($3 billion) to cover the expected fines stemming from ongoing investigations by U.S. regulators.
As a result, TD’s stock has sunk this year, to the point that the bank trades down 5% year-to-date. That’s an incredible discount for an otherwise stellar long-term buy.
The other reason to consider TD right now is its dividend. The bank has paid out a generous quarterly dividend for nearly two centuries without fail. As of the time of writing, that works out to a respectable 5% yield. This makes TD a great dividend stock to consider.
Let’s not forget that TD also provides shareholders with generous annual bumps to that dividend. This makes it a great buy-and-forget option for any investor to consider.
Why you should buy TD right now
TD’s issues in the U.S. have led to the bank trading significantly lower in recent months. That being said, over the longer term TD remains a stellar option for investors. Not only has the bank already set aside funds to cover the anticipated fines, but the bank continues to show strong signs of growth.
In fact, TD’s U.S. presence comprises more branches than its mature and profitable Canadian branch network. That U.S. network extends from Maine to Florida along the East Coast, and TD hasn’t been coy about intending to expand that presence further.
In other words, once this current dip in the stock passes, investors can expect TD to resume its course of growth. That makes the current 5% dip in stock price a great discounted dividend stock option to consider.
Until then, prospective investors can scoop up that juicy yield and wait out the eventual recovery that will come.
Final thoughts on this dividend stock
No investment, even the most defensive stock is without risk. Fortunately, in the case of TD that risk is largely offset by the reliable (and profitable) domestic arm of the bank.
In my opinion, TD is a great bank stock to own as part of any larger, well-diversified portfolio.
