There’s more than a few great dividend options on the market right now. There’s also one magnificent Canadian stock that is trading down nearly 9% this year and has insane long-term potential.
That stock is Toronto-Dominion Bank (TSX:TD) and here’s why this magnificent Canadian stock belongs in your long-term portfolio.
Meet TD Bank a magnificent Canadian stock
TD is one of Canada’s big bank stocks, which makes it a long-established holding for nearly every investor. That’s because the big banks offer competitive dividends and boast a good balance between a reliable domestic segment and a growth-focused international presence.
In the case of TD, the bank boasts a mature network in Canada of over 1,000 branches blanketing the country. The bank also operates a growing network in the U.S., where it enjoys an even larger branch network.
Incredibly, that U.S. network came about following the Great Recession when TD bought several smaller banks and stitched them together. As a result, that U.S. branch network is now larger than its Canadian sibling in branch numbers and stretches from Maine to Florida.
The increasing diversification of the bank into both countries is just one reason why this is a magnificent Canadian stock to own right now.
The other reasons to consider this stellar bank stock include its extremely juicy dividend and growing appetite for expansion. Throw in the current discount on the stock, and you have a compelling investment opportunity for long-term growth and income.
Why is TD Bank trading down 9% this year?
If TD is such a magnificent Canadian stock, then why is it down 9% this year?
In short, growth-focused TD ran into problems in its primary growth market. Following an investigation by U.S. regulators, it was determined that TD Bank wasn’t doing everything that it was supposed to do to prevent money laundering.
As a result, the bank was hit with a whopping fine of nearly US$3 billion and is subject to an asset cap for some time. TD also needs to upgrade its monitoring controls to prevent something like this from happening again.
Fortunately, throughout the investigation, TD set aside funds to cover that expected fine. That being said, the asset cap is the most worrying item on that list.
As noted above, the U.S. market is TD’s primary growth market, and a cap on TD in that market will hamper the potential for TD to grow further for what could be several years.
The other reason why investors love TD right now
When TD’s stock price began to tumble, the yield on TD’s dividend went in the other direction. As of the time of writing, TD now offers investors a very tasty 5.2% yield. This makes TD one of the best-paying options among the big banks.
It also means that investors with $25,000 to invest into TD now at a discount will earn an income of nearly $1,280.
Even better, investors who aren’t ready to draw on that income yet can reinvest it, allowing any eventual income to grow further.
It’s also worth noting that TD has paid out dividends for well over a century without fail and has an established history of providing investors with juicy annual upticks to that dividend.
In short, TD is a magnificent Canadian stock that should, in my opinion, be a core holding in any well-diversified long-term portfolio.
