TORONTO-DOMINION BANK $57 (Toronto symbol TD; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.8 billion; Market cap: $102.6 billion; Price-to-sales ratio: 3.0; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www.td.comtarget=”_blank”) is Canada’s largest bank, with $921.8 billion of assets.
TD continues to benefit from its recent deal with Aimia (Toronto symbol AIM) to become the main credit card issuer for the popular Aeroplan travelreward program. The bank’s insurance operations also benefited from a 32% drop in claims in the latest quarter.
As a result, TD’s earnings jumped 36.8% in the three months ended July 31, 2014, to $2.2 billion from $1.6 billion a year earlier. Per-share profits gained 40.2%, to $1.15 from $0.82. These figures exclude unusual items, such as costs related to the new Aeroplan business.
Revenue rose 6.0%, to $7.5 billion from $7.1 billion. The bank set aside $338 million to cover potential bad loans in the latest quarter, down 29.1% from $477 million a year earlier. That’s because more of its U.S. borrowers are paying their car and home equity loans on time.
TD now gets 25% of its earnings from the U.S., which includes its 40.72% stake in TD Ameritrade Holding Corp. (New York symbol AMTD), a leading online brokerage. That puts it in a strong position to profit as the improving American economy spurs demand for mortgages, car loans and investment securities.
The bank’s earnings per share probably rose 16.6% in fiscal 2014, to $4.35 from $3.73 in 2013. The stock trades at 13.1 times that estimate. The $1.88 dividend yields 3.3%.
TD Bank is a buy.
