We all love a deal. But there are few that offer the long-term deal that is Toronto-Dominion (TSX:TD). TD stock has taken a bit of a hit recently, which may make some investors hesitant. However, if you’re a dividend enthusiast, this dip is actually a golden opportunity. TD stock has consistently offered a robust dividend yield, currently sitting at around 5.17%, making it a lucrative option for those looking to lock in passive income. Despite recent setbacks, TD’s dividend is not only attractive but also reliable, given its solid track record and industry position.
Into earnings
The most recent earnings report, while impacted by a $3.1 billion fine from the U.S. Department of Justice, still demonstrates TD stock’s financial resilience. Although TD’s earnings took a hit, the bank had wisely set aside provisions for this outcome. This cautious planning underscores TD’s strength in managing financial headwinds. While current issues may affect short-term growth, TD stock’s proactive steps, like selling 10% of its U.S. assets to improve liquidity, show TD’s commitment to stabilizing its financial position.
Looking back at TD’s past performance, it has long been a stable player in the Canadian banking sector. Although it’s facing restrictions in the U.S., TD has shown remarkable adaptability. For instance, while U.S. growth might be on hold, the bank’s focus on expanding Canadian personal and commercial banking, as well as its wealth management segment, offers new avenues for growth. Even with regulatory challenges, TD stock’s diversified business model remains a strong foundation for sustained dividends.
TD stock’s outlook includes a transition period in 2025, during which the bank aims to improve its return on equity and maintain growth in Canada. Though forecasting TD’s earnings may be challenging in the short term, the bank’s management has laid out a clear roadmap to address these regulatory issues. By focusing on core Canadian markets and wealth management in the U.S., TD stock seeks to keep its dividend stable while navigating temporary roadblocks.
Today’s value
The current dip in TD stock’s share price also makes it appealing for investors who prioritize value. With a forward price-to-earnings (P/E) ratio of 9.80, TD stock is trading at an attractive valuation compared to historical averages. This drop provides a favourable entry point, allowing dividend investors to buy a solid stock at a discount, maximizing the yield on their investment.
Furthermore, TD stock’s dividend payout ratio of 93.06% reflects the bank’s commitment to returning capital to shareholders. While some might view a high payout ratio as risky, TD stock’s steady cash flow and strong balance sheet suggest that its dividend policy remains sustainable. Given the stability of its Canadian operations, investors can have confidence in TD stock’s dividend continuity, even amid some international challenges.
TD’s status as a “Big Five” Canadian bank adds to its stability. Despite recent fines and operational caps in the U.S., TD stock remains well-capitalized, with $552.44 billion in cash on hand. This allows it to address challenges while continuing to deliver returns to shareholders. TD’s book value per share of $60.85 further emphasizes its intrinsic value, offering a solid foundation for long-term investors.
Bottom line
In addition to its financial strength, TD stock has a relatively low beta of 0.82, indicating less volatility compared to the broader market. For dividend investors, this makes TD stock a reliable choice, as it offers income stability without large price swings. For those focused on long-term income, this low volatility combined with a strong dividend yield can make a big difference.
Lastly, TD’s history of dividend growth, averaging around 4.32% over the past five years, provides a reliable income stream with the potential for future increases. As TD stock navigates its current challenges, its leadership has emphasized a commitment to maintaining and growing its dividend. Given its history, there’s reason to believe TD stock will continue this trend, providing both income and capital appreciation opportunities.
So, while TD stock might seem down, it’s certainly not out. For dividend-focused investors, this is a time to consider adding TD stock to your portfolio, locking in a healthy yield at an attractive price and benefiting from one of Canada’s most reliable banking institutions.
