Canada’s big banks are among the top-performing stocks on the market. Among those great big bank stocks is Toronto-Dominion Bank (TSX:TD), which has risen over 30% year to date. This begs the question of whether investors should consider selling the big bank stock.
Let’s try to answer that question.
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Big bank, big troubles?
I like to remind prospective investors that there’s no such thing as an investment without risk. Even the big bank stocks, with their reliable revenue streams and juicy yields, are not immune to risk.
In the case of TD Bank, investors have learned that lesson over the past few years. That’s because TD was found liable by U.S. regulators for not doing enough to stem money-laundering activities.
The bank was ultimately found liable, and a hefty fine and asset cap were imposed on TD.
That ultimately led TD Bank’s stock price to dip a bit and remain stagnant while its peers continued to rise. It wasn’t until this year’s meteoric 32% rise that TD finally dug itself out from those lows.
But does this mean it’s a good time to sell?
TD still has plenty of growth to realize
As of the time of writing, TD trades at just over $101. That puts the bank just shy of its 52-week high despite its still-attractive price-to-earnings ratio of just 10.48.
TD’s rise this year may have some investors contemplating whether to sell. Market volatility and confidence in the bank (given its prior issues) are prime examples of why investors may be inclined to sell.
Adding to those woes is TD’s asset cap on the U.S. market. That could be concerning for some investors, as TD’s U.S. presence was its primary growth market.
Fortunately, TD Bank has moved on. The bank divested some of its U.S. assets and has started to focus on other areas to fund growth. This includes expanding its branch network in key markets and focusing on its digital banking platform in Canada.
Additionally, the bank is committed to completing additional stock buybacks this year, which could prove lucrative for investors.
In other words, it might not be the best time to sell TD stock, despite the stock’s recent uptick.
Here’s another reason NOT to sell TD Bank stock
One of the main reasons why investors continue to add the big banks to their portfolios is for the dividends that they offer. That’s because the big banks generate a reliable revenue stream that leaves room for growth investments as well as paying a handsome dividend.
In the case of TD, that dividend is a quarterly payout that boasts a yield of 4.16%. This means that a $25,000 investment in TD will generate a stable income stream of just over $1,000.
And that’s not even the best part.
TD has been paying out dividends for nearly two centuries without fail. The bank also has an established practice of providing annual upticks to that dividend going back over a decade without fail.
For prospective investors looking for a buy-and-forget candidate that will continue to provide a growing, stable income stream, TD could be the answer.
Final thoughts
No investment is without some risk, and that includes TD Bank. Fortunately, the bank offers a stable, growing revenue stream and a juicy dividend.
Investors who have shorter timelines and are contemplating selling TD may be inclined to do so given the current price. However, those investors with longer timelines may be inclined to hold the stock to continue generating that juicy income.
In my opinion, TD is a great stock that should be a core holding in any well-diversified portfolio.
Buy it, hold it, and watch your portfolio (and future income) grow.
