Dominion Bank(TD) The Motley Fool·2025-02-13 09:05Core Viewpoint - Toronto-Dominion Bank (TD Bank) offers a high dividend yield of 5.1%, significantly above the S&P 500 average of 1.2% and the average bank yield of 2.3%, making it an attractive option for high-yield bank investments [1] Group 1: Regulatory Issues - TD Bank's U.S. division was involved in money laundering activities, leading to significant regulatory scrutiny and accountability for the bank's internal control failures [3][4] - As a consequence, TD Bank has been placed under an asset cap in the U.S., restricting its ability to grow until it addresses regulatory concerns regarding its money laundering controls [5] - The bank is expected to face a challenging year in 2025 as it restructures its U.S. balance sheet to comply with the asset cap, which may negatively impact its financial performance [5][6] Group 2: Long-term Outlook - Despite current challenges, TD Bank's core Canadian business remains strong and unaffected by the U.S. issues, suggesting potential for recovery and growth beyond 2025 [7] - The bank's long-term growth engine, previously expected to be its U.S. business, will likely experience slower growth until regulatory issues are resolved, but the stock's current low valuation presents a buying opportunity for long-term investors [6][10] - The bank's management increased the dividend by 3% at the end of fiscal 2024, indicating confidence in its ability to maintain dividend payments despite regulatory challenges [9] Group 3: Investment Considerations - TD Bank represents a risk/reward scenario, where investors willing to buy during a downturn may benefit from a historically high dividend yield while waiting for the bank to navigate its regulatory issues [8][10] - The current situation may deter conservative investors, but those with a long-term perspective could find this an opportune time to invest, as the bank is expected to recover and return to growth [11]