Is it a good company at a reasonable price? I like this bank because it is a dividend growth stock that has produced good returns over the long term. I do expect that they will not do as well in the future. In the past Canadian banks have taken over Canadian Trust companies, Canadian stock companies, and got into insurance. They are now going international to grow. International banking, to me, seems more volatile than Canadian banking. The stock price is 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. When I sold some Metro in 2009, I bought this stock. It is the 3rd bank stock I bought.
When I was updating my spreadsheet, I noticed I have had this stock for 23 years and I have made a return of 13.13% per year with 9.05% from capital gains and 4.08% from dividends.
If you had invested in this company in December 2012, for $1,005.00 you would have bought 24 shares at $41.88 per share. In December 2022, after 10 years you would have received $607.20 in dividends. The stock would be worth $2,104.08. Your total return would have been $2,711.28.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $41.88 | $1,005.00 | 24 | 10 | $607.20 | $2,104.08 | $2,711.28 |
If you had invested in this company in December 1988, for $1,001.25 you would have bought 225 shares at $4.45 per share. In December 2022, after 34 years you would have received $6,311.25 in dividends. The stock would be worth $19,725.75. Your total return would have been $26,037.00.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $4.45 | $1,001.25 | 225 | 34 | $6,311.25 | $19,725.75 | $26,037.00 |
If you had invested in this company in December 1976, for $1,001.25 you would have bought 1220 shares at $0.82 per share. In December 2022, after 46 years you would have received $49,705.67 in dividends. The stock would be worth $106,957.40. Your total return would have been $156,663.07. The original cost takes into consideration stock splits of which there were 3 since 1976. That means that you would have really paid a stock price of $5.84 a share.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $0.82 | $1,000.40 | 1,220 | 46 | $49,705.67 | $106,957.40 | $156,663.07 |
The dividend yields are moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 4.35%. The 5, 10 and historical median dividend yields are also moderate at 4.03%, 3.79% and 3.53%. The dividends have increased in the past 5 years at a moderate rate (8% to 14% ranges) at 8.7% per year. The last dividend increase was in 2022 and it was for 7.87%.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2022 is 38% with 5 year coverage at 43%. The DPR for Adjusted Earnings per Share (AEPS) for 2022 is 43% with 5 year coverage at 45%. The DPR for Cash Flow per Share (CFPS) for 2022 is 35% with 5 year coverage at 37%. The DPR for Free Cash Flow for 2022 is $15% with 5 year coverage at 8%. (There is disagreement on what the FCF is.)
Debt Ratios are fine. Because it is a bank, I am looking at Long Term Debt/Covering Asset Ratio. For 2022 it is 0.93 and that is fine. I get a liquidity Ratio of 3.44, but this is not considered important for banks. The Debt Ratio is 1.06 and this is fine for banks.
The Total Return per year is shown below for years of 5 to 47 to the end of 2022. 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. |
|---|---|---|---|---|---|
| 2017 | 5 | 8.66% | 7.40% | 3.55% | 3.86% |
| 2012 | 10 | 9.44% | 11.86% | 7.67% | 4.19% |
| 2007 | 15 | 8.45% | 10.02% | 6.36% | 3.65% |
| 2002 | 20 | 9.69% | 12.74% | 8.55% | 4.19% |
| 1997 | 25 | 10.71% | 11.38% | 7.79% | 3.59% |
| 1992 | 30 | 10.26% | 15.72% | 10.69% | 5.02% |
| 1987 | 35 | 10.52% | 13.86% | 9.64% | 4.22% |
| 1982 | 40 | 9.90% | 15.33% | 10.43% | 4.91% |
| 1977 | 45 | 11.07% | 17.27% | 11.23% | 6.05% |
| 1975 | 47 | 10.76% | 15.33% | 10.51% | 4.82% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 8.25, 9.82 and 11.82. The corresponding 10 year ratios are 10.68, 11.93 and 13.15. The corresponding historical ratios are 10.36, 11.62 and 13.01. The current P/E Ratio is 10.28 based on a stock price of $88.20 and EPS estimate for 2023 of $8.58. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I also have Adjusted Earnings per Share (AEPS) Ratios. The 5-year low, median, and high median Price/Earnings per Share Ratios are 9.35, 11.12 and 12.32. The corresponding 10 year ratios are 10.35, 11.55 and 12.69. The current P/AEPS Ratio is 9.76 based on a stock price of $88.20 and AEPS estimate for 2023 of $9.04. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $108.68. The 10-year low, median, and high median Price/Graham Price Ratios are 0.81, 0.90 and 1.01. The current P/GP Ratio is 0.81 based on a stock price of $88.20. The current ratio is at the low ratio of the 10 year median ratios. 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 1.59. The current P/B Ratio is 1.52 based on a stock price of $88.20, Book Value of $111,383M, and Book Value per Share of $58.07. The current ratio is 5% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have Book Value per Share estimate for 2023. The book Value per Share estimate for 2023 is $59.70. This gives a P/B Ratio of 1.48 with a stock price of $88.20 and Book Value of $108,755M. This ratio is 7% 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 4.08 based on the Cash Flow for the last 12 months of $38,949M, Cash Flow per Share of $21.38 and a stock price of $88.20. The current ratio is 29% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. However, a lot of analysts do not consider the cash flow an important item to look at for banks.
I get an historical median dividend yield of 3.53%. The current dividend yield is 4.35% based on a stock price of $88.20 and dividends of $3.84. The current dividend yield is 23% 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 3.79%. The current dividend yield is 4.35% based on a stock price of $88.20 and dividends of $3.84. The current dividend yield is 15% 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 3.18. The current P/S Ratio is 3.13 based on Revenue estimate for 2023 of 51,391M, Revenue per Share of $28.21 and a stock price of $88.20. The current ratio is 2% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is probably reasonable. The 10 year median dividend yield test says this and it is confirmed by the P/S Ratio test. The historical dividend yield test says it is cheap. Other tests tend to say it is cheap or reasonable.
When I look at analysts’ recommendations, I find Strong Buy (4), Buy (6), Hold (5) and Underperform (1). The consensus is a Buy. The 12 month stock price consensus is $101.40. This implies a total return of 19.32 with 14.97% from capital gains and 4.35% from dividends based on a current stock price of $88.20.
Analysts on Stock Chase like this bank, but not all think it is a current buy, but some do. Stock Chase gives this stock 5 stars out of 5. It is on the Money Sense list with a B rating. Andrew Walker on Motley Fool thinks this stock bottom last summer, but is still undervalued. Andrew Button Motley Fool thinks TD has long-term growth catalysts. This bank put out on Newswire their results for 2022.
Simply Wall Street on Yahoo Finance talks about who owns shares in the company. Simply Wall Street gives this bank 4 stars out of 5. Simply Wall Street gives two warnings of earnings are forecast to decline by an average of 1.2% per year for the next 3 years; and unstable dividend track record. The dividends are just unstable if you are American as the dividends are paid in CDN$ and Americans get dividends based on the current exchange rate.
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 13% ownership stake in Charles Schwab. 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 16, 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.
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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