Where Will TD Stock Be in 3 Years?

TD offers opportunities for income and total return investors alike who are willing to hold for the long haul.

| More on:
Man data analyze

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Toronto-Dominion Bank (TSX:TD) has faced a tough stretch in recent years. With its stock down about 11.5% over the last three years, many investors are asking, “Has TD lost its shine?” While no one can predict the future with certainty, analyzing its past performance and the factors driving its business can help form an educated guess on where TD stock could be in three years.

A long-term perspective: Past performance and resilience

Looking at the longer term, over the past decade, TD Bank still managed to deliver a solid return of 128%, or an annualized compound growth rate (CAGR) of about 8.6%. While this isn’t stellar, it’s still a positive, respectable return.

TD’s primary operations in retail banking — both in Canada and the U.S. — mean that the stock is highly sensitive to economic cycles. During the past two recessions, the bank stock saw significant declines in the range of 30-50%. However, the underlying business was far more resilient. Despite these sharp drops in the stock, TD’s adjusted earnings per share (EPS) fell by only 15-20%. In hindsight, these downturns often represented overreactions in the market, where investors feared worse outcomes than materialized.

Moreover, TD’s reliable dividend payout — historically sustainable thanks to its solid earnings — adds a layer of appeal for long-term investors. As of fiscal 2024, TD had a payout ratio of 52% of adjusted earnings, which suggests the dividend is well-supported by its earnings and should remain steady, even if the stock temporarily sells off. This suggests that when the stock sells off, it’s likely a good opportunity to buy the dip for long-term investors.

Three potential scenarios for TD stock’s future

With that background in mind, let’s explore three different scenarios for TD stock over the next three years.

The base case: Steady growth with modest returns

In a base-case scenario, where TD continues to deliver stable, predictable growth, it’s reasonable to project a 5% annual increase in its EPS. Assuming its stock valuation remains unchanged, the TD share price would reach about $90 in three years. This would provide a dividend yield of 5.4%, similar to what the stock yields today at $78 per share. If these projections hold true, investors could see annualized returns of approximately 10.3% — a solid, conservative outcome for the long term.

The bear case: Economic headwinds and lower growth

In a more pessimistic scenario, we might see slower earnings growth, say, just 3% per year. This could occur if we experience an economic downturn or sustained market volatility. In this case, TD stock could fall to about $77 per share. Despite the lower price, the dividend yield would likely rise to 7.6%, making it an attractive option for income-focused investors. However, the annualized return would be more modest at around 5%.

The bullish case: Strong growth and a rising valuation

On the flip side, in a bullish scenario where TD benefits from higher-than-expected earnings growth — let’s assume 7% annually — the stock could see a rise in valuation, potentially reaching $108 per share in three years. This optimistic outlook could generate annualized returns close to 17%, making TD one of the standout performers in your portfolio.

The Foolish investor takeaway

While past performance doesn’t guarantee future results, TD Bank’s strong track record, solid dividend, and position in the North American banking sector suggest it remains a valid investment. Whether the stock moves in a conservative, neutral, or more bullish direction, it’s clear that TD offers opportunities for those willing to hold for the long haul.

Should you invest $1,000 in Sierra Wireless right now?

Before you buy stock in Sierra Wireless, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Sierra Wireless wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

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 Kay Ng 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.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Bank Stocks

man touches brain to show a good idea
Bank Stocks

How to Approach Royal Bank Stock in 2025

Royal Bank is down more than 10% in 2025. Is the stock now oversold?

Read more »

Investor wonders if it's safe to buy stocks now
Bank Stocks

Where Will Royal Bank of Canada Be in 2 Years?

Down 12% from all-time highs, RBC stock trades at a sizeable discount to consensus price target estimates in April 2025.

Read more »

open vault at bank
Bank Stocks

3 Canadian Bank Stocks to Shield Against Market Downturns

Canadian bank stocks are some of the best options on the market, and these three are probably the top ones.

Read more »

calculate and analyze stock
Bank Stocks

1 Canadian Stock Down 7% to Buy and Hold for a Long Haul

Now is the time to take advantage of this top-notch Canadian stock, buying it while it's still down.

Read more »

A worker drinks out of a mug in an office.
Bank Stocks

Royal Bank of Canada: Buy, Sell, or Hold in 2025?

Royal Bank is down 6% in 2025. Is it time to buy the dip?

Read more »

chart reflected in eyeglass lenses
Stocks for Beginners

Seize the Dip: Investment Opportunities Await This April

If you're looking for one and only one opportunity during a market dip, buy this top stock.

Read more »

hand stacks coins
Bank Stocks

Here’s How Many Shares of IGM Financial You Should Own to Get $1,000 in Yearly Dividends

Besides its attractive dividend income, IGM Financial’s strong long-term growth fundamentals could help its stock outperform the broader market in…

Read more »

A person looks at data on a screen
Bank Stocks

Where Will Bank of Montreal Stock Be in 5 Years?

These factors give Bank of Montreal (TSX:BMO) stock the potential to outperform the broader market in the next five years.

Read more »