TD Bank’s profit increase and dividend increase: I told you so!

The Toronto Dominion Bank (TSX:TD) just released earnings results for its fiscal fourth quarter ended October 31. The results exceeded expectations, both in terms of turnover and operating results. The bank increased its dividend by 2.9% after they came out. Investors were happy with TD’s fourth-quarter earnings release, sending the stock up 1.5% in the hours immediately after the release.

To me, this was all quite expected. I’ve been bullish on TD Bank all year, having bought some shares late last year for $78 and another lot for $82 earlier this year. I’ve also shared my bullishness on TD stock extensively here on Motley Fool. Both purchases worked out well for me and performed better than the market. Presumably some of my readers shared in the profits.

In this article, I’ll examine TD Bank’s fourth-quarter earnings results and what it means for investors.

Summary of Earnings

In announcing its fourth quarter earnings, TD reported high growth and profitability across the board, exceeding expectations on all fronts. Some highlight statistics include:

• $16 billion in adjusted revenue, up 7.5%.
• $15.5 billion in reported revenue, down less than 1%.
• Adjusted earnings per share (EPS) of $2.19, up 26.7%.
• $1.82 in reported earnings per share, down 7.6%.
• Some lingering costs of the successful Cowen deal and the failed one First horizon deal, both pretty negligible.
• The common equity tier 1 ratio (CET1 ratio) of 14.7% improved from 13.1%.
• A dividend increase from $1.05 per share to $1.08 per share (quarterly, so the new annual amount is $4.32).
• A target of 6%–8% earnings per share in 2026.

It’s hard to overstate how much things have improved from this time last year. In December 2024, the US Department of Justice (DoJ) announced that TD was being fined $3 billion and that its assets in the US retail segment would be capped at $430 billion. Investors sold TD shares en masse and the company warned of no growth in 2025. Ultimately, TD achieved significant revenue growth in 2025. Now it is guiding growth in the range of 6% to 8% in 2026. Great!

What to do with TD stock now?

It’s nice to know that TD just posted a good quarter. However, markets reacted quickly to the release, sending TD shares soaring. Is this considering that TD stock is a buy?

Frankly, I still think TD is a pretty sensible portfolio position. However, it is clear that it will not repeat its brilliant performance from 2025 again in 2026. I don’t plan on buying any more TD stock here. But consider this:

1. TD still trades at just 10 times reported earnings.
2. Its price-to-earnings ratio based on adjusted earnings – 13.8 – is much lower than the TSX average.
3. Many industries, such as telecoms and utilities, today trade at more than 20 times earnings, while growing less and being less profitable than TD Bank.

It is common for bank stocks to trade at lower prices than other sectors because banking is a highly regulated, asset-heavy industry with low expected growth. Nevertheless, here we have TD Bank trading at 10 to 13.8 times earnings while growing quite a bit and expecting to grow even more in the future. I would rather own this than most of what is floating around in the telecom and utility sectors of TSX, as well as other banks.

Silly takeaway

In the fourth quarter, TD Bank once again proved that it can do the impossible: grow its profits with one hand tied behind its back. TD’s US retail bank asset ceiling is a major handicap, yet the bank is still growing and beating the market. In my opinion it’s still an ‘OK’ grip.