TORONTO-DOMINION BANK $55 (Toronto symbol TD; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.9 billion; Market cap: $104.5 billion; Price-to-sales ratio: 3.3; Dividend yield: 4.0%; TSINetwork Rating: Above Average; earned $2.4 billion, or $1.18 a share, in its fiscal 2016 first quarter, which ended January 31, 2016. That’s up 5.8% from $2.1 billion, or $1.12, a year earlier.

Earnings for its Canadian banks (62% of the total) rose 4.4%, thanks to strong loan demand and gains from the wealthmanagement and insurance businesses. Earnings from U.S. banking (31%) jumped 20.2%. That’s largely because the low Canadian dollar enhanced its profits. However, earnings from wholesale banking (7%) fell 16.1%. Lower stock trading volumes offset higher advisory fees on mergers and acquisitions.

Revenue rose 13.1%, to $8.6 billion from $7.6 billion. However, TD set aside $642 million to cover potential future loan losses, up 77.3% from $362 million. That’s mainly because it recently acquired the U.S. credit card portfolio of department store Nordstrom’s (New York symbol JWN). As well, low oil prices could hurt the ability of energy producers to repay their loans. These borrowers represent less than 1% of TD’s overall loan portfolio.

The strong first quarter results let TD raise its dividend by 7.8%. The new annual rate of $2.20 a share yields 4.0%. The stock trades at 11.5 times the $4.77 a share that TD will probably earn for all of fiscal 2016.

TD Bank is a buy.


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