After the Great Recession, when American banks were struggling, Warren Buffett stepped in to invest in Bank of America. It was a contrarian play, as the iconic American bank was in deep trouble at the time. Buffett is taking profits now that Bank of America has recovered. A similar contrarian opportunity exists today with Toronto-Dominion Bank (T.D. -0.90%).

If you have $1,000 to invest that isn’t needed to pay monthly bills, bolster an emergency fund, or pay off short-term debt, you should consider investing it in shares of this bank. Here’s why.

The ugly story of TD Bank

By delivering the bad news up front, the Toronto-Dominion Bank, usually simply called TD Bank, ran afoul of U.S. banking regulators. The circumstances were also bad, as it is not good to see your bank used by money launderers. TD Bank has had to revamp its anti-money laundering controls and will pay a fine of around $3 billion for its past actions.

Image source: Getty Images.

However, the truly troubling consequence of this unfortunate period is that TD Bank’s US operations will be subject to an asset cap. This essentially means that it cannot expand its operations in the United States without approval from American regulators. That approval likely won’t come until TD Bank regains the trust of regulators. Expansion into the United States has been TD Bank’s big growth initiative, so it will likely go through a prolonged period where it lags behind. its banking peers.

And next year will be a period in which U.S. business performance looks rather weak. Indeed, TD Bank must rework its balance sheet to free up capacity to serve its customers. The company is already warning that this would hurt its profits.

This is what investors buy into when they buy TD Bank today. But with a rate of 5.2% dividend yieldinvestors are fairly well compensated for the risk. Note that the average dividend of a bank, using ETF SPDR S&P Bank (NYSEMKT:KBE) as a proxy, its yield is only 2.5% today (less than half!).

TD Bank’s problem may not be as bad as it seems

To be fair, TD Bank will likely lag the industry for a while as its main growth engine is now at a standstill. However, the American company is only one part of a much larger enterprise. Indeed, TD Bank is still the second largest bank, in terms of deposits, in Canada. And its Canadian operations are unaffected by the American upheaval. It also operates a significant capital markets business. The bank won’t run at full capacity, but the car hasn’t completely stalled.

Meanwhile, the big fine has already been paid. TD Bank has a significant stake in Charles Schwab. She recently sold about $2.6 billion worth of her position, which is probably no coincidence (she had already set aside the remaining roughly $400 million). In other words, the financial shock to the company is actually quite minor when considering day-to-day operations. Yes, ongoing costs will likely be higher due to the improved controls, but this is a manageable change.

So, from a long-term perspective, TD Bank seems very likely to survive this difficult period and eventually turn around its business. This shouldn’t be shocking for a bank that has paid a dividend every year since 1857. And given that the big fine is already paid, there’s probably no reason to worry about a dividend cut. So you’re basically being paid very well to get through a period of poor performance.

TD Bank is worth the risk

Is there more uncertainty in holding TD Bank compared to other banks? Probably. But the risk appears relatively low, and over time the company will do what it takes to regain the trust of regulators — and Wall Street. When this happens, the valuation gap between TD Bank and the rest of the banking industry should narrow.

If you don’t mind reaping a big return between now and then, perhaps by increasing your investment in reinvestment of dividendsTD Bank is a low-risk turnaround story you’ll want to look into now. It may even be the best high-yielding bank stock you can buy, whether you have $1,000 or $100,000 to invest.