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TD Bank: A Safe And Undervalued Dividend Stock

StockBros Research profile picture
StockBros Research


  • Financial stocks are generally believed to benefit from rising interest rates.
  • Higher interest rates will lead to higher revenue, and possibly, higher net interest margins.
  • We estimate that TD is currently undervalued.

TD Canada Trust bank, located in the Toronto business and financial center

Elijah-Lovkoff/iStock Editorial via Getty Images

As we enter the final quarter of 2021, rising interest rates appear to be the talk of the street again. Financial stocks are generally believed to benefit from rising rates. The Toronto-Dominion Bank (

This article was written by

StockBros Research profile picture
Two bros that talk about stocks, mainly GARP (growth at a reasonable price) stocks, but we look for opportunities everywhere. We don't have a specified time horizon. We invest in a stock for as long as our thesis holds true, and get out when the facts change. In addition, we've developed market-beating algorithms with python that help us find attractive investment opportunities within our own portfolios.Website: www.stockbrosresearch.comTwitter: @StockBrosTrades

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (22)

at and avg cost of $51I am pleased with my TD holdings. Appreciate this analysis. Will consider adding to portfolio on down days
I like that they now own 10% of Charles Schwab, a large and profitable US broker.
Dividend Latitude profile picture
@ge0rgep I didn't know that. Thanks for the info!
Interesting, but as a practical matter, no one in the marketplace uses a dividend discount model to value a bank. They use PE and TBV multiples and on that basis, TD is generally fairly valued, although modestly cheaper than most of the rest of the big Canadian banks.
One of the best banks in the americas. The article is completly misleading because the long term growth is higher.
StockBros Research profile picture
@Croogie Did you actually read what we wrote?

"As you can see, TD is trading under fair value if we simply assume a 2.05% percent growth rate using the current discount rate. We believe it is likely to grow faster than that."


"The company is currently undervalued even when using a very conservative valuation. The market is essentially pricing in approximately 2% long-term growth under current market conditions. We believe this to be overly pessimistic for a high-quality company such as TD."

We're showing that the market has low expectations of TD based off of its valuation, and that we don't agree with the market's growth expectations.
careful investor 1 profile picture
Garbage bank. We are moving our business from there
Money Talks! profile picture
@careful investor 1, not the best bank in Canada, that's for sure!
They are not one of the worst performing Canadian banks for nothing.
migdu profile picture
@careful investor 1 I have nothing but praise for my TD branch. I’ve tried my local RY, BNS & CM - TD is far better.
careful investor 1 profile picture
@migdu Until something goes wrong then getting an answer or getting fixed you have to pull teeth
1.21 Jigawatts profile picture
Solid bank. Only bank I own besides US Bancorp...figure having one on each side of the border is good policy.
@1.21 Jigawatts usb has been trimming services. Forced me to open an account elsewhere.
Thanks for the article, I appreciate the point of view.

I am long three of the Canadian banks; TD, BMO, BNS. While I appreciate there are differences between the banks and how they have developed their franchises, I view them as essentially valued about the same; there are nuances, but they all live in the same neighborhood, so to speak. I think they are all solid companies, offering solid dividends.

Author, I just wonder if, amongst the universe of Canadian banks, TD is also your favorite, and, if so, why?

Best of luck to all.
StockBros Research profile picture
@chicagotim1 It's tough to say because they are similar, but we'd say TD is our favorite out of the big Canadian banks because of their more consistent growth and higher returns on equity. Royal bank comes second. And, if we don't limit it to only the big banks, we like Equitable Group as well because of its growth and ROE. TD for stability, EQB (TSX ticker) for growth
@StockBros Research appreciate the comment, thanks
Money Talks! profile picture
@StockBros Research, TD is the worst performing Canadian bank stock since the pandemic crash and there is a good reason for it.
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