The S&P/TSX Composite Index dropped 259 points on July 19. North American markets ran into major turbulence to open the week. The financials space suffered a 1.9% retreat. Canada’s big banks have built significant momentum after the sharp market dip in 2020.
However, this latest bout of turbulence has eaten into those gains. Today, I want to discuss whether Canadians should look to buy the dip in TD Bank (TSX:TD)(NYSE:TD). Let’s dive in.
Should investors be worried about the Delta variant?
Some analysts and economists speculated that recent volatility stems from concerns over the rise of the COVID-19 Delta variant. Even countries with a high proportion of fully vaccinated citizens, like Israel, are starting to experience a shock due to the rise of this variant.
The United States, which started out very well with its early vaccine rollout, has started to plateau. Political leaders have taken aim at vaccine skepticism, but large swaths of the population remain steadfast.
Canada is nearing the 50% fully vaccinated mark. However, health officials are closely monitoring the spread of the Delta variant. This could threaten what has been a promising recovery so far. Indeed, investors should still be optimistic especially given Canada’s improved vaccine record. Today, I want to look at a top bank stock to buy on the dip.
Why TD Bank looks great after the first half of 2021
TD Bank is the second-largest Canadian financial institution. It boasts a huge footprint in the United States, which makes it stand out among its peers. Shares of TD Bank have dropped 6.5% month over month as of close on July 19. The stock is still up 13% in the year-to-date period.
Back in April, I’d discussed why TD Bank was my favourite bank stock. Its exposure to the U.S. economy was one of the main reasons I’d recommended the top bank stock. TD Bank’s stock would go on to achieve a 52-week high by the end of May.
The bank released its second-quarter 2021 results on May 27. Like its peers, TD Bank delivered strong results in the first half of the year. Adjusted net income came in at $3.77 billion or $2.04 per share – up from $1.59 billion or $0.85 per share in Q2 2020. In the year-to-date period, adjusted earnings rose to $7.15 billion or $3.86 per share – up from $4.67 billion or $2.51 per share the same time last year.
Net income in Canadian and U.S. retail soared 86% and 292%, respectively, compared to the second quarter of 2020. Canadian and U.S. retail banking net income received a boost as the bank drew back on its provisions for loan losses. Wholesale banking net income climbed 83% year-over-year to $383 million.
The case for buying TD Bank today
Shares of TD Bank possess a favourable price-to-earnings ratio of 10. The bank last paid out a quarterly dividend of $0.79 per share. That represents a 3.8% yield. It had an RSI of 25 at the time of this writing, which puts the stock in technically oversold territory.