Monday, January 18, 2016

Toronto Dominion Bank

Sound bite for Twitter and StockTwits is: Div growth at a good price. It seems recently all the Canadian banks are selling at good prices. If you do not have too much in the way of financials in your stock portfolio, maybe now is the time to change that. See my spreadsheet on Toronto Dominion Bank.

I own this stock of Toronto Dominion Bank (TSX-TD, NYSE-TD). When I sold some Metro in 2009, I bought this stock. It is the 3rd bank stock I bought. It is the third bank stock I bought.

This bank has a moderate dividend yield and moderate dividend growth. The current dividend yield is 4.13% but the 5 year median 3.71% and it historical median is 3.4%. Dividends have grown at 10.4%, 9.7% and 10.3% per year over the past 5, 10 and 15 years. Today's yield is high, but the median yields, which are the more likely yields are moderate as they are under 4%.

I made two different purchases of this stock, one in 2000 and one in 2009. For my purchase in 2000 (15 years ago) I am earning some 11.4% yield on my original purchase price. For my purchase in 2009 (6 years ago), I am earnings some 8.6% on my original purchase price. If I look at the 10 year median yields for over the past 5, 10 and 15 years, they are 5.3%, 8.2% and 17.9% on original purchase price. So for the stock I bought in 2009, I am doing relatively better on dividend yield on original purchase price than for the stock I bought in 2000.

If you purchase the stock with today's price of $49.45 in 10 or 15 years with dividends increasing at 10% a year, you would be earning 10.7% or 17.2% on your original purchase price. Today's stock price is a good price. This bank also only had two years of flat dividends because of 2008 problems.

I do not see any problem with the bank's Dividend Payout Ratio at present. The DPR for EPS for 2015 was 48% and the 5 year median is 44%. The DPR for CFPS is 37% in 2015 and the 5 year median is 36%.

The balance sheet is fine on this bank. The Debt Ratio is 1.06 and anything at 1.04 or higher is fine for a bank. The Leverage and Debt/Equity Ratios for 2015 are 16.48 and 15.48 which is rather typical for a Canadian Bank.

The comprehensive income is higher and has generally been higher for this bank than the net income. This is a good sign. For 2015 the ROE was 12.5% and the ROE for comprehensive income was 21.5%.

The 5 year low, median and high median Price/Earnings per Share Ratios are 11.40, 12.63 and 13.69. The 10 year corresponding ratios are similar at 11.41, 12.68 and 13.88. The current P/E Ratio is 10.41 based on a stock price of $49.45 and 2016 EPS estimate of $4.75. This stock price testing suggests that the stock price is relatively cheap.

Other things point to good price. The Graham price is higher at $60.09 which will give a P/GP Ratio of just 0.82. With the historical median dividend yield of 3.40%, we have a current dividend yield some 21.3% higher. The price is just relatively cheap, not extraordinarily cheap.

When I look at analysts' recommendations, I find Strong Buy, Buy, Hold and Underperform recommendations. Most of the recommendations are a Buy and the consensus recommendation is a buy. The 12 month stock consensus price is $58.50. Using today's price of $49.45, this implies a total return of 22.43% with 4.13% from dividends and 18.30% from capital gains.

(Maybe all of the analysts did not get the memo that said you should buy good stocks when they are relatively cheap? By buying stocks that are relatively cheap is why it is possible to buy low and sell high. Although, of course, the market may just go down more from here, it is hard to say.)

Benjamin Sinclair of Motley Fool likes this bank. When I look at this report Motley Fool said that they would be putting out a free report on Canada's big five banks. Tammy Falkenburg posted on Zolmax information on recent Institutional action. The analysts comments at Stock Chase are not that positive.

There are economic concerns for Canada and the world and therefore for our banks. The biggest problem is the lack of growth due to government and other debt. Also, some people are worried that banks may suffer because of FinTech. However, these things take a very long time to work their way through the system and it is not assured that FinTech will be the ultimate winner.

I will have only one entry for this stock this year. However, I did a more complete report on this company in 2015 and you can see those reports here and here.

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 Toronto Dominion Bank.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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