Is Toronto-Dominion Bank (TSX:TD) Still Canada’s Best Bank Stock?

Toronto-Dominion Bank’s (TSX:TD)(NYSE:TD) stock has consistently outperformed its peers. After mixed quarterly results, is it still Canada’s best bank stock?

| More on:

I’ve been a Toronto-Dominion Bank (TSX:TD)(NYSE:TD) bull for a number of years. It was hard to bet against the company. It had the best one, two, five and 10-year performance among Canada’s Big Five. Not only that, but it was best positioned for growth with the highest dividend growth rate among  its peers.

There wasn’t much not to like about the company. It is for this reason that TD Bank has typically traded at a premium to its peers. Now that investors have had time to digest the most recent quarterly results, is TD Bank still Canada’s top banking stock? Let’s take a look.

First-quarter results

For the first time in over a year, the company missed analysts’ estimates as earnings of $1.57 came up $0.15 short. On the bright side, revenue of $10 billion beat by $250 million and represented growth of 6.6% year over year.

Although one quarter does not make a trend, the cracks in Canada’s infallible banking sector are beginning to show. In the first quarter, only the Bank of Montreal (TSX:BMO)(NYSE:BMO) met or beat estimates on both the top and bottom lines. Every other Big Five bank posted mixed results at best.

A pattern emerged in the industry. Poor capital markets and asset management numbers dragged numbers lower, which isn’t surprising given the recent volatility in the stock market. This is a short-term headwind and was not of great concern.

The second and most concerning issue is the deteriorating credit quality. Most of the Big Five banks saw significant increases in provision for credit losses (PCL). TD Bank did not escape the trend, as PCL rose 15% year over year. Although PCL are still but a fraction of outstanding loans (0.50%), it is a trend worth monitoring.

Top bank for growth

Outside of the poor capital markets and rising PCL, the company performed quite well. It continues to grow at a decent pace and it managed impressive growth in Canadian (+6%) and U.S. (+21%) retail banking.

On the back of lower-than-expected results, it now expects 2019 earnings growth to come in at the lower end of its 7-10 per cent target. The good news? It still boasts the highest expected earnings growth rate among its peers.

The company also raised its dividend by 10%, thereby extending its dividend growth streak to nine years. It also continues to out-raise its peers with the highest-dividend growth rate. Based on expected growth rates and the company’s current payout ratio, it’s a trend that isn’t likely to end any time soon.

Foolish takeaway

Although it didn’t have the best quarter, I still consider TD Bank to be Canada’s best. The entire sector is worth monitoring as PCLs rise. However, it’s too early to tell whether it’s a blip on the radar or the beginning of a longer and more concerning trend. In the meantime, TD Bank still has the best growth rates and is growing its dividend at a faster pace than its peers. It hasn’t been knocked of its perch…yet.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor mlitalien owns shares of BANK OF MONTREAL and TORONTO-DOMINION BANK.

More on Dividend Stocks

Female raising hands enjoying vacation, standing on background of blue cloudless sky.
Dividend Stocks

CRA Update: The Basic Personal Amount Just Increased in 2025!

The BPA just increased, leaving Canadians with more cash in their pockets and room to make more cash!

Read more »

dividends can compound over time
Dividend Stocks

3 Defensive Stocks That Could Thrive During Economic Uncertainty

Discover how NextEra Energy, Brookfield Renewable, and Enbridge combine essential services with strong dividends to offer investors stability and growth…

Read more »

hand stacks coins
Dividend Stocks

Canada’s Smart Money Is Piling Into This TSX Leader

An expanding and still growing industry giant is a smart choice for Canadian investors in 2025.

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

TFSA Contribution Limit Stays at $7,000 for 2025: What to Buy?

This TFSA strategy can boost yield and reduce risk.

Read more »

Make a choice, path to success, sign
Dividend Stocks

Already a TFSA Millionaire? Watch Out for These CRA Traps

TFSA millionaires are mindful of CRA traps to avoid paying unnecessary taxes and penalties.

Read more »

Canada Day fireworks over two Adirondack chairs on the wooden dock in Ontario, Canada
Tech Stocks

Best Tech Stocks for Canadian Investors in the New Year

Three tech stocks are the best options for Canadians investing in the high-growth sector.

Read more »

Happy golf player walks the course
Dividend Stocks

Got $7,000? 5 Blue-Chip Stocks to Buy and Hold Forever

These blue-chip stocks are reliable options for investors seeking steady capital gains and attractive returns through dividends.

Read more »

Concept of multiple streams of income
Stocks for Beginners

The Smartest Dividend Stocks to Buy With $500 Right Now

The market is flush with great opportunities right now, and that includes some of the smartest dividend stocks every portfolio…

Read more »