Toronto-Dominion Bank (TD.TO)

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.

It is safer because of the US exposure. They have not acted like a 50% American bank. They probably will raise the dividend in the next quarter. (Analysts’ Target: $70.00).

Move some National Bank (NA-T) funds over to this bank? If you want to make a switch, TD makes more sense than National. It has more US exposure. However, he would rather you buy a US bank, such as Citigroup (C-N), J.P. Morgan (JPM-N) or Bank of America (BAC-N).

On a valuation basis, all Canadian banks are trading similar to one another, so don’t let the share price dictate good or bad, cheap or expensive. This is trading at 11X, similar to most of the banks. It has done an excellent job in their retail banking and has the formula down, better than any other Canadian bank. Dividend yield of 3.6%.

This has its wealth component which he likes. It has been a great rewarder to shareholders over time.

The only Canadian bank he owns. He likes that he doesn’t have to buy a US bank because of their US operations. They are retail in nature, which reduces the volatility of capital market activities. Fee income is a big focus for them. The only downside threat that could be out there are auto loans. Because they are in the US, they tend to do better than the American banks, which tend to be very fractured. They don’t have the systems in place like Canadian banks do.

He likes this company if rates rise in the US. They have opportunities in the US because it is a fractured industry. Retail oriented, so there is less volatility and safer, which accounts for a higher dividend over time, compared to the rest of the Canadian banks. Dividend yield of 3.7%. (Analysts’ price target is $71.)

Canadian banks look great right now. Chart shows this had a longer term of consolidation from 2014 to 2016 and then broke out. After topping out this year, all the banks looked like they are basing and trying to break out. Probably not a bad time to be buying the banks.