TD Bank has been front and center in the news lately after being charged with a failure to have proper anti-money laundering practices in place in its U.S. operations. As part of the resolution reached this week, the company will be forced to pay a total of US$3.09 billion and be subject to an asset cap on its two U.S. Banking subsidiaries. The company is also required to remediate its internal policies and will be subject to more stringent regulatory oversight and approval requirements going forward.

Despite the size of the penalties imposed on TD Bank, we do not expect it to materially change the future share price. The amount of the fine is largely in line with what the company had made provisions for and what has been priced into the market. The regulatory oversight and asset cap restrictions will no doubt create a headwind for future growth in the short term, but TD Bank’s U.S. operations were already in decline due to credit deterioration and a shrink in US deposits. This may reduce the impact of the asset cap and force the company to target its personal and commercial banking operations in Canada, which generate far better returns.

We expect TD Bank to maintain its dividend as they work through this issue in the coming year or two. Considering its current dividend yield of 5.26%, we believe the stock will continue to provide value in your portfolio. As interest rates continue to decline, Canadian dividend stocks, such as TD Bank, will thrive. For this reason, we maintain our position but will continue to monitor the stock regularly.

Livingston Wealth Management Group