I own this stock of Toronto Dominion Bank (TSX-TD, NYSE-TD). I bought shares in this bank at a good time in 2000 and 2009. I sold some in 2017 because they comprised more than 10% of my portfolio.
When I was updating my spreadsheet, I noticed that my total return was 12.98% per year with 8.89% from capital gains and 4.09% from dividends.
I also looked at two long term periods. If you bought shares with $1,000.40 in 1976 (42 years ago) you would have gotten 1220 shares with a price of $0.82. Today, those shares would be worth $87,742.40 and you would have collected $41,507.27 in dividends. If you bought shares 32 years ago, cost would be $4.45 per share and you would have gotten 224.72 shares. Today those shares would be worth $16,161.86 and you would have collected dividends worth $7,433.13. (Note that the chart below and Total Return shows a low about for the past 30 years.)
The dividend yields are moderate with dividend growth moderate. The current dividend is moderate (2% to 4% range) at 4.26%. The 5, 10 and historical dividend yields are also moderate at 3.93%, 3.73% and 3.50%. the dividends have been increased moderately (8% to 14% ranges) at 9.23% per year over the past 5 years. The last increase was in 2020 and it was for 6.8%.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2020 is 48% with 5 year coverage at 45%. The DPR for CFPS is 49% with 5 year coverage at 32%. The DPR for Free Cash Flow is anyone’s guess. Morningstar says that the FCF is $230,079M and WSJ says a negative $28,453M.
Debt Ratios are fine. Because this is a bank, you look for covering assets, so Long Term Debt/Covering Assets Ratio is fine at 0.71. The Liquidity Ratio really does not matter for banks. The Debt Ratio is 1.06 and anything at 1.04 or above is fine for banks.
The Total Return per year is shown below for years of 5 to 45 to the end of 2020. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2015 | 5 | 9.23% | 10.08% | 5.80% | 4.28% |
| 2010 | 10 | 9.81% | 10.92% | 6.84% | 4.09% |
| 2005 | 15 | 9.57% | 9.50% | 5.87% | 3.63% |
| 2000 | 20 | 10.03% | 9.52% | 6.17% | 3.36% |
| 1995 | 25 | 11.18% | 15.44% | 10.45% | 4.99% |
| 1990 | 30 | 9.77% | 14.46% | 9.97% | 4.49% |
| 1985 | 35 | 10.36% | 13.27% | 9.31% | 3.96% |
| 1980 | 40 | 10.49% | 15.17% | 10.33% | 4.84% |
| 1975 | 45 | 10.93% | 15.34% | 10.51% | 4.82% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 10.50, 11.76 and 13.03. The corresponding 10 year ratios are 10.93, 12.17 and 13.30. The corresponding historical ratios are 11.42, 11.40 and 13.84. The current P/E Ratio is 12.87 based on a stock price $74.11 and EPS estimate for 2021 of $5.76. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $80.34. The 10 year low, median, and high median Price/Graham Price Ratios are 0.6, 0.94 ad 1.03. The current P/GP Ratio is 0.92 based on a stock price of $74.11. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share Ratio of 1.61. The current P/B Ratio is 1.49 based on a Book Value of $95,499M, Book Value per Share of $49.80 and a stock price of $74.11. The current P/B Ratio is 8% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 3.16. The current P/CF Ratio is 0.46 based on Cash Flow for the last 12 months of $231,789M, Cash Flow per Share of $127.63 and a stock price of $74.11. The current ratio is 85% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. The problem with this current Cash Flow is that it is way out of line with past normal amounts for Cash Flow. I do not find P/CF Ratio helpful in analyzing bank stocks.
We might be better off using Cash Flow less Working Capital in this instance. The 10 year median Price/Cash Flow per Share less Working Capital is 9.18. The current P/CF Ratio (less WC) is 9.28. The current ratio is 1.09% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median, or around the median.
I get an historical median dividend yield of 3.50%. The current dividend yield is 4.26% based on a stock price of $74.11 and dividend of 3.16%. The current dividend is 22% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 3.73%. The current dividend yield is 4.26% based on a stock price of $74.11 and dividend of 3.16%. The current dividend is 14% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 3.16. The current P/S Ratio is 3.43 based on Revenue estimate for 2021 of $39,261M, Revenue per Share of $21.62, and a stock price of $74.11. The current ratio is 9% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is probably reasonable. The stock price is cheap or reasonable and below the median according to dividend yield testing, but reasonable and above the median in P/S Ratio testing. So, they both agree it is reasonable. Analysts are expecting a 10% decline in Revenue and this is probably due to problems Covid. Most testing is showing the stock price as reasonable.
Is it a good company at a reasonable price? I do think the stock price is reasonable. This is a dividend growth stock, which is the sort I like. I also like Canadian Banks. I like this one and I own it.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (2), Hold (8), and Underperform (3). The consensus would be a Hold. The 12 month stock price consensus would be $74.43. This implies a total return of 4.70% with 0.43% from capital gains and 4.26% from dividends based on a stock price of $74.11. Analysts overall do not seem to expect much movement in price.
Analyst on Stock Chase like this bank along with Royal. Andrew Button on Motley Fool talks about 2020 earnings spike which was due to TD selling TD Ameritrade to Charles Schwab. He says the banks has strong earnings and a 4.26% yield so it is a great stock. The Executive Summary on Simply Wall Street gives this stock 4 stars out of 5. It says a risk is an unstable dividend track record and this is not true. Kevin Orland on Bloomberg talks about the trial where trustees for Stanford investors is trying to recover US $4.5B from the bank. The Blogger Dividend Earner did a recent review of this stock. On YouTube there is analysis of this bank at Ask Pramod Kumar. Geoff Zochodne on the Financial Post talks about the Schwab-TD Ameritrade deal.
Toronto-Dominion is one of Canada's two largest banks and operates three business segments: Canadian retail banking, U.S. retail banking, and wholesale banking. The bank's U.S. operations span from Maine to Florida, with a strong presence in the Northeast. It also has a 42% ownership stake in TD Ameritrade, a discount brokerage. Its web site is here Toronto Dominion Bank.
The last stock I wrote about was about was Calian Group Ltd) ... learn more. The next stock I will write about will be Bank of Nova Scotia (TSX-BNS, NYSE-BNS) ... learn more on Friday, January 15, 2021 around 5 pm. Tomorrow on my other blog I will write about Telus, Gordon Pape.... learn more on Thursday, January 14, 2021 around 5 pm.
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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
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