December 13, 2018

TD Bank (TD)

The Toronto-Dominion Bank and its subsidiaries are collectively known as the TD Bank Group (TD).  Based out of Toronto, Ontario, Canada, TD is becoming an increasingly multi-national bank with operations that span the entire breadth of the banking industry.  It employs more than 82,000 people around the world and serves about 19 million customers.  The Toronto-Dominion Bank was officially formed on Feb. 1, 1955 when the Bank of Toronto (founded in 1855) merged with The Dominion Bank (started in 1869).  TD has about $630 billion dollars worth of assets and has become a leader in the online banking industry.  It is one of the, “Big Six” Canadian Banks, and shares the usual attributes that all six of the Canadian banks are known for. TD is now on RBC’s radar as it going for the #1 spot for the biggest bank in Canada.  Foremost amongst these qualities is a representation for cautious investing, low rates of leverage, and responsible expansion.

 

TD bankWhile investors will often refer to investing in the Canadian banks as if they were all the same, there are some differences.  TD and Royal Bank (RY) are decisively bigger than the Bank of Nova Scotia (BNS), the Bank of Montreal (BMO), the National Bank of Canada (NA), and the Canadian Imperial Bank of Commerce (CM), and TD offers a range of services that only RBC can really match.  Ultimately TD is a very stable company that looks to be a great pick for investors looking for Canadian bank exposure.

 

The four main branches of the company are Canadian Personal and Commercial Banking (including TD Canada Trust and TD insurance), Wealth management (which is oversees TD Waterhouse and TD Ameritrade), Wholesale Banking (securities), and U.S. Personal and Commercial Banking (including TD Bank, commonly known as “America’s Most Convenient Bank”).  Together, TD and its subsidiaries represent a startlingly diversified company that has strong potential for growth (as evidenced by its recent push to attract first-time homebuyers in the USA), yet has a stable foundation in its Canadian roots.

 

TD’s reputation as a leader in online banking is well deserved.  Their user-friendly platform is impressive, and their array of easy-to-use investing options separate their online experience from that of their peers.  With the rise of “hands-off” index investing, TD is leading the pack in terms offering options that efficiently track the whole market, and for record low management fees.  These index funds can only be purchased online and are called the e-series.  They have been well received by proponents of the “efficient market” theory that don’t seek to beat the street and simply want to minimize their fees. They also take a major step in their customer service as they were the first bank to extend their weekly branch hours, open on Saturdays and now… they open on Sundays too! TD is definitely doing everything in its power to make the customer at ease.

 

The TD business model places a strong emphasis on risk discipline.  They even go so far as to explicitly say in their corporate profile that they, “Only take risks we understand… Systematically eliminate tail risk… Culture and policies aligned with risk philosophy.”  Proof that TD really incorporates this philosophy in their policies is evidenced by the fact that they are one of the only banks in the world rated AAA by Moody’s (think about how many governments, including the USA’s that are at risk of not having AAA status).  This definitely makes the company attractive from a long-term investment standpoint, which is what many dividend investors are looking for.  The stock is currently trading right around $80, with a 52-week high of $86.82.  I really like TD, but I feel that it is currently a little overvalued relative to the other Canadian banks.  Its Price-to-Earnings ratio is 14.33.  While these are solid overall numbers for a stock, they are below average for the class.  If you’re willing to pay a premium for the ultimate in stability, this maybe the company for you.

 TSE TD

TD Dividend Metrics

Ticker Name Dividend Yield Payout Ratio DEBT_TO_MKT_CAP Dividend Growth 5 years Dividend Growth 1 years
TD Toronto-Dominion Bank/The 3.23% 47.60% 0.95 8.18% 2.05%

 

 

Trackbacks

  1. […] banks.  Some analysts refuse to lump the bank into the same category as Toronto-Dominion Bank (TD), Royal Bank (RY), Bank of Montreal (BMO), the Bank of Nova Scotia (BNS) and the Canadian Imperial […]

  2. […] Since 2009 BMO Capital Markets has hired more than 130 new director-or-higher level employees in the USA.  This adds to the over 2,000 international employees that the branch now employs, including over 1,000 in the USA.  With many of the Canadian banks taking advantage of their strength relative to their stumbling USA competitors, BMO is definitely looking to gobble up market share in the banking vacuum that the 2008 downturns caused within the industry.  Perry Hoffmeister, the head of USA investment and corporate banking explains that, “With all the changes happening on Wall Street, we have been building our wholesale business by taking advantage of the dislocation to hire great bankers, salespeople and traders.”  It remains to be seen whether this large expansion into the USA will benefit the company in the long run, but it is definitely a bold attempt to keep up with its competitors such as Royal Bank of Canada (RY) and Toronto-Dominion Bank (TD). […]

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