Toronto-Dominion Bank (TSX:TD)(NYSE:TD) faces mounting challenges as its share price has declined 11% year-to-date, reflecting investor concerns over financial and operational headwinds. Yet, with a 5.1% dividend yield, the stock could remain appealing to income-focused investors.
The big news involving the company is that TD recently withdrew its financial-growth targets, citing difficulties in growing earnings over the next year. This move follows a US$3.09 billion settlement with U.S. authorities over money-laundering charges, which has forced the bank to allocate significant resources to bolster its risk and compliance infrastructure. These efforts, while necessary, are weighing on profitability. Plus, regulators in the U.S. have put restrictions on its ability to grow its business there.
The company recently reported earnings, which weren’t great. In Q4, TD posted a profit of CA$3.6 billion, which was down from CA$2.9 billion in the same period last year. The bank’s U.S. retail segment saw profits plummet 32% while Canadian banking profits grew by 9%.
In the near term, TD faces some considerable challenges ahead. But for long-term investors, it can still potentially make for an appealing option to buy and hold right now. The stock trades at 1.3 times its book value and less than 10 times expected future earnings (based on analyst estimates).
Given the discount investors can get TD’s stock at right now plus the high-yielding payout, it might be worth loading up on it for the long haul. This can be a good stock for investors to buy on weakness and put into their tax-free savings accounts and forget about. Bad press or not, TD is still likely to be a cornerstone of the Canadian banking sector for decades to come.