Toronto-Dominion Bank (TSX:TD) ended 2024 on a rough note, with its stock down 10.6% for the year. The decline was driven by investor concerns surrounding its U.S. anti-money laundering compliance issues. But now that the bank has formally resolved those investigations and committed to a multi-year remediation plan, the outlook could begin to shift. This could be one of the key reasons why TD stock has outperformed the broader market so far in 2025.
As of March 28, TD stock has climbed 13% to $86.37 per share, far outpacing the TSX Composite Index, which has remained largely flat. With a market cap of $151.5 billion and a 4.9% dividend yield at current levels, TD is starting to look attractive again to long-term investors who value both income and stability.
Let’s explore what the next three years could look like for TD and whether now is the right time to get on board.
Image source: Getty Images
Why TD stock is rallying in 2025
A few key drivers have helped TD turn things around in early 2025. First, resolving its high-profile U.S. AML probe has taken a major cloud off the stock. That uncertainty had been weighing on the bank for a while, but now that it’s out of the way and with a clear remediation roadmap in place, investors are seeing TD stock in a new light.
Second, the recent divestment of its Schwab stake added another layer of optimism, injecting a hefty capital buffer into the bank and leading to $8 billion in planned share buybacks.
Besides these positive factors, declining interest rates in Canada and the U.S. are also expected to help boost credit demand in the coming years, which could lead to stronger lending volumes and improved profitability across TD’s North American operations.
Strong financials and fundamentals
In the first quarter (ended in January) of its fiscal year 2025, TD posted $3.6 billion in adjusted net income, with earnings per share ticking up to $2.02 from $2.00 per share a year earlier. Similarly, the bank’s adjusted revenue for the quarter rose 9% year over year to a solid $15 billion.
And while its U.S. retail segment still has some work to do, TD’s Canadian personal and commercial banking division continues to be a rock, pulling in record revenue with solid loan and deposit growth.
Where will TD stock be in three years?
In addition to its focus on improving compliance and operational efficiency, TD is actively building for the future. Its recent strategic initiatives include rolling out artificial intelligence (AI)-driven tools to strengthen its AML controls, streamlining its U.S. balance sheet, and winding down underperforming portfolios. It’s also making strategic moves in wealth management and wholesale banking, both of which reported record revenue in the latest quarter.
Overall, TD is starting to look like a bank that’s not just recovering but repositioning itself to thrive in the long run. With a nearly 5% dividend yield and a solid plan in place, there’s a good chance TD stock will reward patient investors handsomely over the next three years.
