Toronto-Dominion Bank (TD.TO)

This just blew out the numbers last quarter. Trading at a reasonable 1.7X BV. Great ROE in Canada, but are adding a fair amount of earnings power through their US network. With interest rates going up in Canada, and somewhat in the US, that benefits the bank. Dividend yield of 3.6%. (Analysts’ price target is $74.)

She likes the banks, and this one in particular. They had a very strong quarter. A year ago, people thought they were overvalued versus historical. Now, in terms of price to earnings and price to BV, they are in line with historical. Rising interest rates should be positive for banks. She also likes their US exposure. Dividend yield of 3.6%. (Analysts’ price target is $74.)

Historically Canadian banks reach a fairly important low around the end of September, and then move higher through until the end of November, when banks report 4^th quarter results. CEOs love to give you good news at that time. We are just about to enter a period of seasonal strength for this bank. Chart shows the price has been coming down, but has formed a nice base. Recently the stock has started to show positive momentum, and also has moved above its 20-day moving average. It might be a little early for a seasonal trade, but this is an interesting opportunity going into the fall.

Numbers were good, but he was disappointed in their US numbers. Thinks they have sorted things out with their branches and their staffing and will do better. At one time, they were trading at a premium, but that premium has gone away, but it will come back. Dividend yield of 3.6%. (Analysts’ price target is $74.)

They have never cut their dividend to his knowledge. They reported very strong earnings. They are about the 10^th largest bank in the US. The ROE is starting to come up in the US. The yield is decent.

Power Financial (PWF-T) or Toronto Dominion Bank (TD-T)? He would take the simpler course and go the bank, because Power Financial is associated with all kinds of financial services. Then there is the parent, and then there is the family. The Canadian banking base is tremendously strong.

The Canadian bank stock group is one of the cheapest groups. Their latest earnings were superb. From a long-term point of view, the $64 level has been about a 9-year base on a P/B basis. The one thing that has thrown him is that they’ve said they are going to be buying back stock. He doesn’t like companies that buy back stocks. Dividend yield of 3.5%. (Analysts’ price target is $74.)

They had an issue in March with respect to aggressive sales practices, which has kind of hung over them a little. They’ve always been one of the better banks, but seem to be lagging a little. He didn’t own this bank because the exposure to the US was a concern, but it is no longer a concern.

Thinks we are going to see pretty good earnings. They had a very strong 1^st quarter, and then the stock got smacked around because of sales practices. These things should pass over time. All Canadian banks are inexpensive. He is expecting lots of dividend increases and good future growth. In the past few years, Canadian banks have defied expectations with 6%-8% earnings growth. The stock prices have gone up, but not enough to compensate for the 6%-8% earnings growth. If they can deliver 4%-5% earnings growth going forward, plus a 4% dividend yield and dividend increases, you are going to make double digit returns going forward.

Toronto Dominion (TD-T) or Bank of Nova Scotia (BNS-T) for an RRSP? He really can’t answer that, but would suggest you buy both, or choose the one you think is right for your portfolio. He owns this for its US exposure.

He owns a bunch of the banks. He has RY-T and CM-T. The biggest challenge with TD-T is their 5 year cash flow. On May 25^th it was down 6%. The dividend is well covered and grew 8% last time.

It has been a core position for him for a long time. He likes the US side of it. The US housing market is bubbling nicely. They are going to get a fair participation. The earnings are out this week. This is a case of slow and steady wins the race.

He loves banks and is max weighted in them. He owns 4 of them. This has been the underperformer. It is either number 1 or 2 in all the businesses in Canada. Stocks are down YTD because of the housing concern, but it does not really matter to them. The bubble is not bursting. This is a good entry point. (Analysts’ target: $71.00).

(Top Pick Apr 12/16, Up 22.40%) The Canadian banks are systematically undervalued right now. There is so much talk about the housing crisis and Canadians being over indebted, but he does not agree. Wealth management is going to be big. There is no increase in defaults in mortgages and only a little in auto and credit cards. With their dividend, what’s not to like? It will be 11 quarters in a row if this quarter the banks again exceed expectations.

He is not big on TD-T, but prefers BNS-T because it is less exposed to Canada and he likes the emerging markets exposure. He is not that excited about Canadian banks because of the lack of loan growth and the housing question overhanging them. The rising Canadian dollar takes away from the US operations.