The Toronto-Dominion Bank (TD) increases dividend by 12% & offers an above-average yield.

The Toronto-Dominion Bank’s (NYSE:TD) dividend was increased by a solid 12%.  Its overall yield is now 3.54%. The firm started paying a dividend in 1969.

The Toronto-Dominion Bank is one of the largest financial firms in Canada. The firm maintains three unique units including Canadian Retail, Wholesale Banking and U.S. Retail.  The bank provides personal and small business loans and also investment services. It also offers investment banking, property and casualty insurance, and trading.  It has several brands including TD Canada Trust, TD Bank,  and TD Ameritrade. The firm maintains over 1,100 branches and is headquartered in Toronto, Canada.  It was founded in 1955.

The Toronto-Dominion Bank has maintained a solid three-year growth rate of dividends of 9.5 percent. The Toronto-Dominion Bank currently ranks 6th in dividend yield within the large cap financial, foreign money center banks category. The quarterly dividend for the May payment will be $0.46 versus the prior year rate of $0.41 per share. The Toronto-Dominion Bank is not a member  of our Top 100 Dividend Stocks.  (see below).

The dividend will be paid at the new higher rate on May 1, 2017, to shareholders of record at close of business on April 10, 2017. The Toronto-Dominion Bank is currently priced at $48.70 Listed in the table below are the quarterly dividend payments since 2010.

Date Quarterly Dividend Canadian Dollar Quarterly Dividend U.S. Dollar
4/10/2017 0.6 0.456
1/6/2017 0.55 0.416
10/5/2016 0.55 0.417
7/6/2016 0.55 0.424
4/6/2016 0.55 0.419
1/6/2016 0.51 0.364
10/2/2015 0.51 0.384
7/7/2015 0.51 0.403
4/2/2015 0.51 0.404
1/2/2015 0.47 0.404
10/1/2014 0.47 0.42
7/7/2014 0.47 0.441
4/1/2014 0.47 0.425
1/2/2014 0.43 0.404
10/1/2013 0.425 0.412
7/5/2013 0.405 0.384
4/1/2013 0.405 0.398
1/2/2013 0.385 0.385
10/1/2012 0.385 0.392
7/2/2012 0.36 0.35
4/2/2012 0.36 0.362
1/3/2012 0.34 0.333
10/3/2011 0.34 0.326
7/1/2011 0.33 0.342
4/1/2011 0.33 0.341
1/4/2011 0.305 0.307
10/1/2010 0.305 0.295
7/1/2010 0.305 0.291
4/1/2010 0.305 0.3
1/4/2010 0.305 0.29


Analysis of The Toronto-Dominion Bank is based upon our five key criteria for the Top 100 list, which include;

Category Value Score
Dividend Yield 3.54% 91
Dividend Growth (3-7 year avg) 10% 220
Forward P/E 12.25 60
S&P Financial Rating AA- 120
Beta 0.75 50
Total Score 541

Additional Information;

% Yield 3 Year Div. Growth Rate 7 Year Div. Growth Rate BV 2016 P/BV Ratio 10 yr P/BV Low 10 yr P/BV High 5 yr low Yield % 5 yr max Yield %
3.54% 9.5% 10.3% 40.65 1.28 0.98 2.35 3.03% 4.51%

Final Analysis;

Positives;

  • The Toronto-Dominion Bank’s dividend yield is above that of the S&P 500 Index.
  • The Toronto-Dominion Bank maintains an investment grade rating of AA-.
  • The Toronto-Dominion Bank has maintained a three-year growth rate of dividends of 9.5 percent.
  • The Toronto-Dominion Bank has paid out a dividend consecutively for the past 48 years.
  • The Toronto-Dominion Bank maintains a beta of 0.75, below the average company.

Negatives;

  • The Toronto-Dominion Bank’s current dividend yield (3.54%) is below its five-year average historical dividend yield.

Latest Earnings & Overall Analysis:

The Toronto-Dominion Bank issued its earnings data on March 2nd. The company reported $1.00 earnings per share (EPS) for the Q1, topping the consensus estimate of $0.96 by $0.04.  The results were receive positively by investors for the second largest bank in Canada. The bank reported net income of $2.5 billion, compared to the $2.3 billion projected by analysts. The large financial firm also hiked its dividend by 5 cents for the quarter ending in April.

The bank did see rising provisions for credit losses, which was unlike other banks reporting Q1 results in Canada. Provisions for credit losses accelerated by 18 percent in Q1 of this year to $270 million. Toronto-Dominion is among the least exposed to the energy sector among the Canadian banks. The Canadian retail unit had solid 4 percent growth with net income at the division at $1.5 billion.  The U.S. retail division posted net income of just over $800 million. This was 6 percent above the $751 million posted in Q1 2016.  The Tier 1 Capital ratio stands at nearly 11 percent, a half percent better than last year’s results.

2016 2015 2014 2013 2012
Earnings per Share 4.67 4.21 4.14 3.46 3.38
Annual Dividend 2.16 2 1.84 1.62 1.45
Payout Ratio 46.25% 47.51% 44.44% 46.82% 42.90%

The firm also announced the potential to repurchase up to 15 million common shares for 2017. Return on equity came in at 14.5% for Q1, much above many U.S. banks. As with other key Canadian banks featured on our website, Canada has six banks that hold 90% of the banking deposits. Toronto-Dominion is one of the most prominent, with 40% of all Canadians using the bank.

We think the bank is one of the top Canadian banks with good growth exposure in the United States.  It has limited exposure compared to other North American banks to the energy sector. The banks two big acquisitions in the 2000s gave the bank more diversification.  Revenue from the United States is now nearly 30% of total income.  This is nearly double that of seven years ago. Although the Canadian operations are very profitable versus the United States, the firm has the potential to continue to merge the return on equity in both areas higher.

Earnings per Share 2017 (projected) 4.95
Dividend 2.32
Payout Ratio 46.87%

The bank maintains a high yield of 3.5% with the new increase, in line with other Canadian banks, but far above U.S. based banks. However, the price rise from January 2016 was nearly 30 percent, dropping the overall yield from its high level of nearly 4.5%.   In fact, its yield is towards the lower end of its historical range and closer to July 2014’s level. Although the firm also has a stellar balance sheet and low beta, Toronto-Dominion Bank is just outside our Top 100 Dividend Stocks list.

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The Toronto-Dominion Bank Dividend Yield Historical Chart (Click to enlarge)

Chart Explanation:  Dividend growth stocks may be viewed undervalued when the current yield is above historical readings for the past 5 years.

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