Is it a good company at a reasonable price? I still like this bank as I do all Canadian Banks. However, I do not think that they will perform as well in the future as they had in the past. In the past they have taken over other sectors in Canada of trust companies, brokerage companies and also into insurance. They are now expending into foreign banks. I do think the banks will be fine, but this expansion will not be as profitable as their past expansions in Canada. I current think this stock is on the expensive side.
When I look at analysts’ recommendations, I find Strong Buy (4), Buy (4), Hold (5) and Underperform (1). The consensus would be a Buy. The 12 month stock price is $104.66. This implies a total return of 5.75% with 2.27% from capital gains and 3.48% from dividends based on a stock price of $102.34.
I looked at the TD site for their analysts’ rating and they have only three ratings and they are Buy (6), Hold (4) and Sell (1). The consensus is a Buy with a consensus 12 month stock price of $105.25. So, this is not much different than above.
When I look at analysts’ recommendations last year, I found 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. Analysts overall do not seem to expect much movement in price. What happened was a total return of 42.35% with 38.09% from capital gains and 4.26% from dividends. Last year I said that I thought the stock price was reasonable.
I own this stock of Toronto Dominion Bank (TSX-TD, NYSE-TD). This stock, as all banks, was on Mike Higgs' Canadian Dividend Growth Stock list and the other dividend lists that I followed. On my investment in this bank, I have made a total return of 13.94% per year with 10.18% from capital gains and 3.76% from dividends.
For the shares I bought in 2000, 21 years ago, I am earning dividend yield on my original investment of 19.27%. My original yield is 2.34%. For the share I bought in 2009, some 12 years ago, I am earing a dividend yield on my original investment of 14.51%. My original yield was 5.12%.
However, dividend increases are currently lower than when I bought shares. So, if you bought shares today, with the lower increase currently at 7.91%, in 12 years your yield would potentially be 8.67% and in 21 years, your yield would potentially be 17.19%. The current dividend yield is 3.48%. Although as for all banks, yields will probably vary over time.
|My Yield||Org Yield||Yrs.||Curr Yld||Future||IRR|
When I was updating my spreadsheet, I noticed both Revenue and EPS were higher than analysts though they would be in 2021. Analysts estimates for Revenue was 39,261but revenue came in as $42,562. Analyst estimate for EPS was $5.76, but EPS came in at 7.72.
I have two calculations on investing at around $1,000 and what would stock be worth today:
- If you had invested in TD Bank in December 1976, $1,000.40 you would have bought 1220 Shares. In December 2021, after 44 years you would have received $45,362.47 in dividends. The stock would be worth $118,315.60. Your total return would have been $163,678.07.
- If you had invested in TD Bank in December, 1988 $1,001.25 you would have bought 225 Shares. In December 2021, after 32 years you would have received $8,153.44 in dividends. The stock would be worth $21,820.50. Your total return would have been $29,973.94.
|Cost||Tot. Cost||Shares||Years||Dividends||Stock Val||Tot Ret|
The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 3.48%. The 5, 10 and historical dividend yields are also moderate at 4.03%, 3.76% and 3.52%. The dividend growth for the last 5 years is at 7.91% per year. The last dividend increase was at the end of 2021 and it was for 12.7%. However, the bank went a year without any dividend increases.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2021 is 41% with 5 year coverage at 44%. The DPR for Cash Flow per Share for 2021 is 11.5% with 5 year coverage at 8%. The DPR for Free Cash Flow for 2021 is 11% with 5 year coverage at 8%. There is disagreement on what the FCF is, but values are close.
Debt Ratios are fine. Because this is a bank, I am looking at Deb/Covering Assets Ratio, which for 2021 is 0.69. This is good. I do calculate a Liquidity Ratio but this is not important for banks. The ratio for 2021 is 3.67. The Debt Ratio, which is important, is 1.06 and this is fine for a bank.
The Total Return per year is shown below for years of 5 to 46 to the end of 2021. 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.|
The 5 year low, median, and high median Price/Earnings per Share Ratios are 10.50, 11.47 and 12.44. The corresponding 10 year ratios are 10.68, 11.93 and 13.15. The corresponding historical ratios are 10.50, 11.76 and 13.03. The current P/E Ratio is 12.99 based on a stock price of $102.34 and EPS estimate for 2022 of $7.88. The current P/E Ratio is between the median and high of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $95.65. The 10 year low, median, and high median Price/Graham Price Ratios are 0.84, 0.92 and 1.01. The current P/GP Ratio is 1.07 based on a stock price of $102.34. The current ratio is above the 10 year high ratio. This stock price testing suggests that the stock price is expensive.
I get a 10 year median Price/Book Value per Share Ratio of 1.59. The current P/B Ratio is 1.98 based on a stock price of $102.34, Book Value of $94,118M and Book Value per Share of $51.60. The current ratio is 25% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Cash Flow per Share Ratio of 3.16. The current P/CF ratio 3.27 based on a stock price of $102.34, Cash Flow for the last 12 months of $50,129M and Cash Flow per Share of $27.48. The current ratio is 3% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 3.52%. The current dividend yield is 3.48% based on a stock price of $102.34 and Dividends of $3.56. The current yield is 1% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median dividend yield of 3.76%. The current dividend yield is 3.48% based on a stock price of $102.34 and Dividends of $3.56. The current yield is 8% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10 year median Price/Sales (Revenue) Ratio is 3.16. The current P/S Ratio is 4.45 based on Revenue estimate for 2022 of $41,937 and a stock price of $102.34. The current ratio is 41% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably expensive. The dividend yield testing shows the stock price as reasonable but above the median. However, this is not confirmed by the P/S Ratio test which says the stock price is expensive. All the other testing says the stock price is above the median or expensive.
I look at the total return over a number of years. For P/S Ratio and P/E Ratio, the lower the ratio the cheaper the stock. For yield, the higher the yield, the cheaper the stock. In the chart below you can see that the current P/S Ratio looks on the high side. The P/E Ratio looks high against a number of past years. The dividend yield is sort of in the middle of the pack.
In the following chart the capital gains for the 10 years to December 31, 2021 is 9.78% per year. The beginning yield was at 3.47%, and the P/E Ratio and the P/S Ratio were at 11.90 and 3.14. Does this chart change my opinion of the stock price? Not really as the P/S Ratio looks high against other years.
|# Years||Cap Gains||Beg P/E||Beg P/S||Beg Yield|
All the recent analysts’ recommendations on Stock Chase are a buy. Nicholas Dobroruka on Motley Fool says this stock is on his watch list. Karen Thomas on Motley Fool says the TD Bank is a best-in-class bank stock. The bank talks about their fourth quarterly results on Newswire. In a Bloomberg article, Chief Executive Officer Bharat Masrani said additional share repurchases would be a possible use of the lender’s excess capital if it doesn’t deploy those funds in a major acquisition. A Simply Wall Street article on Yahoo Finance talks about dividends from this bank. Sometimes this US site mistake dividend cuts and currency exchange. Dividends are in CDN$ so if you are in the US dividends can be more volatile when exchanged into US$. I have 46 years of data on this bank and they never cut the dividends once in that time.
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 (TSX-CGY, OTC-CLNFF) ... learn more. The next stock I will write about will be Bank of Nova Scotia (TSX-BNS, NYSE-BNS) ... learn more on Monday, January 17, 2022 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.
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