Rising earnings in both the U.S. and Canada ensure the sustainability of this leading Canadian bank’s 3.5% dividend yield. The stock currently trades at just 9.8 times estimated 2019 earnings.
The bank continues to grow. Thanks to a recent acquisition, the firm now also ranks as Canada’s largest wealth management firm.
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TORONTO-DOMINION BANK (Toronto symbol TD; www.td.com) gets 56% of its earnings from its Canadian retail business. The U.S. supplies a further 35%, and the remaining 9% comes from securities trading and investment banking services.
In the quarter ended October 31, 2018, TD earned $3.05 billion, excluding one-time items. That’s up 17.1% from $2.60 billion a year earlier. Due to fewer shares outstanding, per-share earnings rose 19.9%, to $1.63 from $1.36.
Earnings from Canadian retail banking operations increased 4.6%. That gain was due to strong demand for new loans from consumers and businesses, as well as higher interest rates. Earnings at the U.S. business jumped 43.6% in the quarter. That’s largely because the bank and its 42%-owned TD Ameritrade Holding Corp. (Nasdaq symbol AMTD) recently acquired discount broker and retail banker Scottrade.
Thanks partly to the Scottrade purchase, Ameritrade will contribute $322 million (Canadian) to TD’s earnings for the 2019 first quarter, ending January 31, 2019. That’s a jump of 84.0% from $175 million a year earlier. To put those figures in perspective, TD earned $3.05 billion, or $1.63 a share, in the quarter ended October 31, 2018.
The bank’s provisions for bad loans rose 15.9% in the quarter, to $670 million from $578 million a year earlier due to higher provisions for its U.S. credit cards and auto loans.
In November 2018, the bank paid $817 million for Regina-based wealth management firm Greystone Managed Investments. As a result, TD is now Canada’s largest wealth management firm.
The new operations will help push up overall earnings in fiscal 2019 by about 7%, to $6.96 a share. The stock trades at 9.8 times that estimate. The $2.68 dividend yields 3.5%.
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