Is TD Bank Still a Good Buy?

Toronto-Dominion Bank (TSX: TD) is Canada’s second-largest bank stock. And while the banks are almost always regarded as stellar investments, TD has been picking itself up over the past year. This has some investors wondering whether TD Bank is still a good buy.

Let’s try to answer that question.

What are TD’s problems?

TD focused its expansion efforts on the U.S. market. In the years following the Great Recession, TD acquired distressed banks and stitched them together to form a single branch network known as TD Bank.

Today, that network stretches from Maine to Florida with over 1,000 branches.

Unfortunately, that growth story hit a temporary snag.

When U.S. regulators found concerns with TD’s anti-money laundering program, the bank was hit with hefty fines and remedial measures. That included US$3 billion in fines and an asset cap on its U.S. operations.

Adding to those woes is the fallout from TD’s failed acquisition of First Horizon, which occurred during that same period. This ultimately led to a temporary drop in TD’s stock and a major halt on further expansion, at least in the U.S. market.

Fortunately, the bank has since recovered from those lows and now trades near its 52-week high.

Is TD still seeing growth?

An asset cap on the U.S. market has required TD to turn to other areas for growth. This includes expanding its branch network and investing in its Canadian digital banking platform.

Further to this, TD has actively completed share buybacks and is planning additional buybacks later this year.

Prospective investors should also note that between the failed acquisition and the sale of its Schwab holdings earlier this year, TD is sitting on quite a bit of capital now. Apart from share buybacks, investors can expect that war chest to be used for some growth efforts.

Let’s talk income

One of the big reasons why investors love the big banks is the juicy dividends that they offer. In the case of TD, the bank offers a juicy quarterly dividend that currently pays out an impressive 4.09% yield.

This means a $15,000 investment in TD will generate an income of over $600. That amount is more than enough to let reinvested dividends start to do their magic over a longer term.

Adding to that appeal, TD has provided annual upticks to that dividend going well over a decade. The bank has also paid out dividends without fail for close to two centuries.

In other words, TD Bank is a good buy for income investors.

Is TD Bank still a good buy for investors?

Canada’s big banks remain some of the best and most stable long-term investments on the market. TD has shown itself to recover from its prior issues, refocus its expansion efforts and invest in its future.

In short, the bank has adjusted course and is back on track for growth. Even better, the bank has accomplished this while the stock still trades at value levels.

In my opinion, TD Bank should be a core holding in any well-diversified portfolio.