Income Expert Banks on Toronto


Jack Adamo Image Jack Adamo Editor, Jack Adamo's Insiders Plus

Valuations are pretty steep all around, but at 13-times trailing GAAP earnings, a 3.4% dividend yield and a 20-year history of 13.53% compound annual growth, I'm willing to put some cash to work with this Canadian banking stock, asserts Jack Adamo, editor of Insiders Plus.

We're going to add to another position today in a previous recommendation — Toronto-Dominion Bank (TD), which was founded in 1855 and provides financial and banking services in North America and internationally.

It operates more than 2,800 automated banking machines, and a network of more than 1,200 branches in Canada. Its U.S. segment provides retail and commercial banking operations through a network of more than 1,300 stores located from Maine to Florida.

Its Wholesale Banking segment provides a range of capital markets and investment banking products and services to companies, governments, and institutions in financial markets worldwide.

Toronto-Dominion's fiscal year does not coincide with the calendar year, so we have Q4 and full-year earnings now. All dollar figures are Canadian. Total revenues rose 8.7% for Q4 and 9.2% for the year to $34.3 billion.

Because of several large items distorting year-over-year comparisons, adjusted earnings are more relevant here, so I'll use them. (GAAP growth is much higher.) EPS rose 7.0% for the quarter and 5.6% for the year to $1.22 and $4.87.

With the Canadian economy heavily weighted to the oil & gas business, the improving outlook in that sector should cause a pickup in bank earnings, as well as some strengthening of the loonie against the greenback, which will further help our returns.

Full-year dividends per share were $2.16, up 8.0% from last year.