It is time for a stock analysis of one of my foundation stock picks, Toronto-Dominion Bank (TD). I’m looking to buy and hold 3-4 Canadian bank companies in my portfolio. Each of the big banks in Canada has different international exposure and interests.
TD Bank Group
This is one of the “Big Five” banks, which are the dominant companies in the banking industry in Canada. TD shares are listed on the TSX in Canada (TD) and the NYSE in the US (TD). TD has a market cap of $102.5 billion, holds assets over $1.1 trillion, and has 85,000 employees in offices around the world. TD’s three major business lines are: Canadian Retail, U.S. Retail and Wholesale. First off lets take a look at some of the key stats for TSX listed TD.
Ratios
Price to Earnings: 13.16
Price to Free Cash Flow: 3.4
Price to Book: 1.6
Return on Equity: 13.75
Price
As of 10/30/15 the stock price for TD was $53.68. The S&P/TSX is down -7.29% and TD is down -3.29% YTD.
P/E (TTM)
13.16
This places TD below the S&P/TSX P/E of 16.1 and the TD 5 year average P/E of 13.7.
EPS (TTM)
4.08 (9.86% CAGR since 2010)
Revenue
Revenue increased 9.52% over 5 years to $30,831 CAD Million (TTM). This is an impressive revenue growth rate. To give you another comparison, revenues were $11,896 CAD Million in 2005.
Yield
TD presently yields 3.73%, which is well within my preferred range of 2.5% and up.
Payout Ratio
47% this is very close to where it was 5 years ago (47.4%) but revenues and EPS have grown since 2010 considerably. The TTM payout ratio is well within range for the company to afford to continue dividend payments.
Qualitative
TD remains the 2nd largest Canadian bank and has grown the profitability and earnings of its US operations. TD is one of the five largest banks in Canada which together account for over 90% of deposits. Banks in Canada are highly regulated; this combined with the sheer size of the major incumbent players makes for a wide moat.
Risks include large exposure to Canadian mortgage and consumer debt. These two factors continue to represent risks to the major Canadian banks and not just TD.
Overall
TD represents an attractive opportunity in the financial sector as it is relatively protected from competition and has a growing presence in the U.S. market.
Disclosure: Long RY, TD and BNS are long Foundation Watchlist Stocks
Dividend Niche 
Thanks for sharing this analysis of TD. I have long liked the large Canadian banks and hold TD, BNS and RY in my ROTH account. No doubt, the Canadian banks are facing serious headwinds from low oil prices, a weakened currency and a potential real estate/debt bubble. TD, with its large U.S. exposure might be one of the stronger bets in the near term along with RY and their recent purchase of City National Bank in the U.S. It seems that for now a stronger U.S. exposure might save those banks. On the other hand, BNS is probably the weakest currently with heavy exposure to weaker South American/Carib economies.
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I am also keen to build up some substantial holdings of RY, TD and BNS. Of course the present economic situation presents some serious challenges for the big five. As you say, TD and RY have more US exposure so I believe my screens will help me choose the best choice when it comes time to make my next move this month. Thanks for checking out my TD analysis. Cheers
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And don’t forget BNS has been targeted by the US for lax money laundering controls.
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It will be interesting to see how BNS manages what is shaping up to be a very challenging year.
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