Investors see the stock market as a way to generate significant wealth. There are countless stories of investors who have seen their capital multiply with top quality stocks such as Apple, Amazon, and Netflix.
All of the above companies are market leaders with a huge international presence. Their diversified product portfolio and expanding addressable markets help them increase their income at an attractive pace.
On the other hand, a robust banking system has always been seen as a basic need of a well-functioning economy. Canadian banks have generated enormous wealth for investors due to their solid fundamentals and growing presence in the market.
Here I am trying to analyze if one of Canada’s banking giants, the Toronto-Dominion Bank (TSX: TD) (NYSE: TD), is a solid bet for investors over the next decade.
The Toronto-Dominion Bank has a market capitalization of $ 108.6 billion
The Toronto-Dominion Bank is Canada’s second largest bank by market capitalization, with $ 108.6 billion. It is the sixth largest bank in North America in terms of total assets and market capitalization.
Like most major Canadian banks, TD has three main lines of business, including Canadian retail banking, US retail banking and wholesale banking. With 2,308 branches in North America and 15 TD Securities branches, it has a well-diversified network.
The Toronto-Dominion Bank has a network of 1,220 stores and 2,778 ATMs in the United States, which is the world’s largest economy. It operates in four of the 10 largest metropolitan areas and seven of the 10 richest states. It currently has access to 110 million people south of the border and also wishes to develop its wholesale activities there.
In Canada, it has more than 1,000 branches and 3,500 ATMs. TD is regularly ranked as a leading player in the retail banking sector and is one of the top two players in the investment banking industry here.
Focus on increasing shareholder returns
The Toronto-Dominion Bank increased profit from $ 7.88 billion in 2014 to $ 11.68 billion in 2019. It targeted long-term adjusted profit growth of between 7% and 10%. Its dividend per share went from $ 0.46 in 2000 to $ 3.01 in 2020, an annual growth rate of 10%.
TD shares are currently trading at $ 60, 23% below their 52-week high. This decline increased the stock’s long-term yield to a tasty 5%. This means that investing $ 10,000 in TD Bank will generate $ 500 in annual dividends.
In the first quarter of fiscal 2020 (ended in January), TD successfully increased revenues by 6% and adjusted earnings per share by 6%, despite a 5% increase in expenses.
What future for investors at the Toronto-Dominion Bank?
TD has managed to gain more than 13% from its 52-week low, but investors will remain concerned about the impact of the COVID-19 pandemic, fears of recession and falling oil prices. This will not only lower business demand, but also increase the risk of default.
All told, TD remains one of the main dividends to buy for Canadians. The Toronto-Dominion Bank will not increase your investment at an exponential rate like growth stocks, but its low payout rate of less than 45% makes a dividend decline unlikely.
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John Mackey, CEO of Whole Foods Market, a subsidiary of Amazon, is a member of the board of directors of The Motley Fool. David Gardner owns shares of Amazon, Apple and Netflix. Tom Gardner owns shares of Netflix. The Motley Fool owns shares of Amazon, Apple and Netflix and recommends the following options: short calls from January 2022 $ 1940 to Amazon and long calls from January 2022 $ 1920 to Amazon. The insane contributor Aditya Raghunath has no position on any of the titles mentioned.