Toronto-Dominion Bank (TSX:TD)(NYSE:TD) stock rose a paltry 0.04% on July 15. Shares have flattened out over the past two months.
Canadian banks are watching with anticipation to see how the U.S. Federal Reserve proceeds later this month, especially after the Bank of Canada vowed to hold its rates until 2020.
TD Bank has grown into a top 10 U.S. bank over the years, which means investors should take an interest ahead of this decision. The bank’s earnings have received a significant boost in the wake of the U.S. Tax Cuts and Jobs Act.
Bank stocks have performed well during previous easing periods, and investors have gorged on the gains we have seen over the past decade in a period of historically low rates.
However, there are concerns ahead of this next round of easing. Banks have been battling thin margins in this low-rate environment. Another reversal would swing the pendulum on lenders who had seen improved margins during the short tightening round. On the other hand, a softening environment will likely boost volumes.
TD Bank is well worth consideration ahead of the Fed’s rate decision. The stock currently boasts a P/E of 12, which puts it in the middle range compared to its peers. The bank last hiked its quarterly dividend to $0.74 per share which represents a solid 3.8% yield.
The policy reversal from central banks is a bullish sign for TD Bank and other top U.S. banks. I like the stock going into late July.
