It’s been a much better bet to invest in Canadian banks, which did not have as much exposure to toxic debt, than U.S. banks over the past 2 years. The Toronto-Dominion Bank (TD) is another Canadian bank that has recovered quickly from the recession. The Zacks #1 Rank (strong buy) recently raised its dividend 8.2%.
The Toronto-Dominion Bank, otherwise known as the TD Bank Group, is the 6th largest bank in North America.
It operates in 4 segments: Canadian Personal and Commercial Banking; Wealth Management, which includes TD Waterhouse and an investment in TD Ameritrade; U.S. Personal and Commercial Banking; and Wholesale Banking, including TD Securities.
Dividend Raised
With business, especially in Canada, jumping, the company has rewarded shareholders by raising the dividend 5 cents a share to 66 cents compared with the prior quarter. It is payable on Apr 30 to shareholders of record as of Apr 5.
Compared to American banks and the rest of the industry, this is an attractive yield of 3.2%. The industry averages just 1.9%.
Impact of TD Ameritrade’s Results
On Apr 18, TD Bank Group said that it expects TD Ameritrade’s second quarter earnings to contribute CDN$57 million in net income to its Wealth Management segment.
TD Bank Group is scheduled to report second quarter results on May 26.
TD Bank Beat By 18% in the Fiscal First Quarter
On Mar 3, TD Bank Group reported its fiscal first quarter results and surprised on the Zacks Consensus by 28 cents. Earnings per share were $1.79 compared to the consensus of just $1.51. It made $1.60 in the year ago period.
Adjusted net income was a record at $1.6 billion up from $1.4 billion in the fiscal first quarter of 2010.
The quarter was boosted by record earnings in the retail business in both the U.S. and Canada which totaled $1.4 billion, a 30% gain over the prior year.
The Canadian Personal and Commercial Banking segment, its largest segment, reported strong volume growth in personal and business deposits as well as real estate secured lending. Wholesale Banking also had a solid quarter.
Outlook for 2011
The bank is bullish about 2011 as it continues to see more signs the global economy is recovering.
The Canadian economy has been even hotter, thanks to the recent commodities boom.
But TD Bank warned that while it expects a solid year in its Canadian Personal and Commercial Banking segment, year over year earnings growth will begin to moderate in the second quarter. It expects slower volume growth in personal banking and continuing margin pressure.
Zacks Consensus Estimates Rise
Given the big beat and optimistic outlook, analysts moved to raise 2011 and 2012 estimates in early March.
The fiscal 2011 Zacks Consensus jumped to $6.81 from $6.36 in the last 2 months. That is earnings growth of 21%.
Growth is expected to continue in fiscal 2012, but at a more moderate pace. The 2012 Zacks Consensus Estimate rose to $7.50 from $7.10 in the prior 60 days which is earnings growth of 10%.
TD is a Value Stock
TD Bank has all the characteristics of a value stock, especially its price-to-book ratio of just 1.9, well under the value cut-off of 3.0 and within the range of “value” for banks.
Its forward P/E is also a respectable 12.6x forward estimates. The company also has a solid ROE of 14%.
Shares have been on a 2-year run, along with the rest of the stock market, recently touching a 3-year high.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.
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