The Basics of Toronto-Dominion Bank

By Amanda Alix | September 21, 2012

For well-nigh 20 years now, the Motley Fool has been here to help you invest better and smarter, using spot-on analysis and a razor-sharp wit. To celebrate Worldwide Invest Better Day on September 25, we are taking some time to get back to the basics -- of investing, that is. In that spirit, I have rounded up some sweet financial sector stocks that have been showing some real sparkle and promise lately.

Without further ado, let me introduce you to the focus of this particular article: Ambitious regional Toronto-Dominion Bank (NYSE - TD).

Northern banks are healthy and wealthy

Big Canadian banks have been performing swimmingly, having weathered the financial storm in fine fettle, particularly when compared with the largest U.S. banks. Like its peers Bank of Nova Scotia (NYSE - BNS), Royal Bank of Canada (NYSE - RY), and Bank of Montreal (NYSE - BMO), TD Bank has been able to maintain decent dividend payments since 2008. This is certainly reflective of the overall health of Canada's banking sector, but U.S. expansion can certainly take some credit for helping to plump TD Bank's balance sheet.

Founded as The Bank of Toronto in 1855 and merging 100 years later with The Dominion Bank, Toronto-Dominion Bank emerged with a branch network of nearly 500 locations across Canada. These days, TD Bank has an extensive branch network in the U.S., and has been able to snag a nice slice of the mortgage loan market as most big domestic banks retreat from that sector. TD is looking to take a bite out of the Big Apple, too, and has announced its intention to become the No. 3 bank in that fair city. This plan is obviously on track, as the bank just this month opened another branch in New York City, pushing it one more location closer to its goal.

As the U.S. economy limps along, Canada is experiencing a bit of a lag as well. A study from TD Bank notes that the housing market is cooling, and the economy as a whole is softening. Bank of Nova Scotia CEO Rich Waugh notes that a soft landing is in store for Canada, however, which will not impact northern banks in a negative way. Indeed, Fitch Ratings seems to concur, saying that a housing correction is a good thing that will contribute to the stability of the banking system and economy as a whole.

The right stuff

TD Bank's recipe for success has withstood the test of time, and its cross-border business model has helped it squeeze profits from both Canadian and U.S. markets. There is no reason to think that a cooling economy up north will slow any of these banks down, particularly when the financial meltdown scarcely dented their bottom lines. TD retains a sunny outlook, and its recent $0.77 dividend payout is testimony to its ability to continue to grow -- as well as supply a nice income check to its investors.