Toronto Dominion Bank 2

I own this stock of Toronto Dominion Bank (TSX-TD, NYSE-TD). I bought this stock in 2000 because the price was good. I have made 13.81% per year on this stock with 10.41% from capital gain and 3.40% from dividends. However, I have followed this stock for a long time, not just since when I bought it.

When I look at insider trading I find $72.5M of insider selling and $69.5M of net insider selling. There was $3M of insider buying by directors. The CEO’s insider selling was at $16.9M and the CFO was at $3.3M. It would seem that the insider selling was of options. There are not only options for this bank but options like vehicles like Rights Deferred Share Units, Rights Performance Share Units, and Rights Vesting Share Units.

The CEO has shares worth $22.3M and options worth $228.5M. The CFO has shares worth $1.3M and options worth $31.7M. An officer has shares worth $0.3M and options worth $0.7M. A director has no shares but has options worth $3M. This is just to give you an idea on insider share ownership and option values.

According to the NASDAQ site, in the 3 months prior to the year end there are 384 institutions holding 53% of the outstanding shares. They have increased their shares marginally by 0.4%.

The 5 year low, median and high median Price/Earnings Ratios are 10.71, 13.05 and 15.09. The current P/E Ratio of 10.48 based on stock price of $81.82 and a 2013 EPS of $7.81 suggests a relatively low stock price. The Graham Price is $91.90. The 10 year low, median and high median Price/Graham Price Ratios are 0.89, 1.00 and 1.20. The current P/GP Ratio is 0.89 and this suggests that the stock price is relatively low.

The 10 year Price/Book Value per Share Ratio is 1.99. The current P/B Ratio is 1.70 a value of only 85% of the 10 year Ratio. This low ratio suggests that the stock price is on the low side (but to be low, you would want the current Ratio to be only 80% or less of the 10 year median ratio.)

The last thing to look at is the dividend yield. The 5 year median dividend yield is 3.82% and the current dividend yield is 3.76%. The current yield is higher than the 5 year median by 1.5%. This current dividend yield suggests that the stock price is at a relatively average level. However, the dividends have not been increasing over the past 5 year at normal levels.

The stock price testing suggests that the current stock price is relatively low.

When I look at the analysts’ recommendations I find Strong Buy, Buy, Hold and Sell. The consensus recommendation is a Buy. (Most of the recommendations are in the first 3 categories and there is only 1 sell.) The 12 month consensus stock price is $89.80. This implies a total return of 13.64% with 9.88% from capital gains and 3.76% from dividends.

One site thought that the Price/Sales Ratios was high. The 5 year P/S Ratio was 3.14 and the one for 2012 was 3.23. Based on current price it is at 3.10. The trailing P/S is 3.25. The 5 year trailing P/S is 3.39. (With this ratio, lower is better.)

The Passive Income Earner blogger had a good review of this stock. I agree that a good way to buy Canadian Banks is to look at the yields and buy the highest yielding bank. Although I must admit, that CIBC generally has the highest yield or is close to that and this has never been a favourite of mine. This is the only of the big 5 that I do not follow. I think that if you want to hold a bank for the long term, what you need is a bank with a relatively historically low stock price.

Huffington Post has an interesting recent article on this bank. The blog entry at Fully Informed on this bank might also be of interest. This bank was also a top pick for RBC Capital Market for 2013.

I do not know why this bank got one Sell recommendation. I know that one analyst said that the Canadian banks currently are at the high end of their stock price ranges and he suggests waiting for a pull back. However, my analysis in stock price testing shows stock price is at relatively low level. I check relative stock prices rather than absolute stock prices. (Of course, we are in a secular bear market and relative prices will go lower before we get into the next secular bull market. The problem is, we do not know when this will happen.)

The TD bank is a bank with a full range of financial products and services for individuals and corporations in Canada, USA and internationally. Financial products and services include Canadian Personal and Commercial Banking; Wealth Management; U.S. Personal and Commercial Banking; and Wholesale banking products. Its web site is here TD. See my spreadsheet at td.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.