Toronto-Dominion Bank (TD.TO)

He likes it. But they generate about 50% of revenue in the US and he captures that through US regionals. He would be a buyer otherwise. There is upside and the dividend is safe. He is underweight Canadian banks as a whole.

(A Top Pick April 10/15. Down 0.06%.) Has been adding to this recently because Canadian banks are under this big Shorting position from the US. All the banks look cheap. Yields are up and they keep increasing their dividends. Their big US content should do well. Dividend yield of 4.1%. (See Top Picks.)

(Top Pick Mar 18/15, Down 0.53%) They upped their dividend. They are doing exactly what they promised. There is a significant contraction on the PE ratio. He thinks it is an incredible opportunity. They have the smallest exposure to the oil and gas area and also have the most exposure to the US .

(A Top Pick Feb 23/15. Up 1.39%.) This and its US exposure makes this his favourite bank. 25% of businesses is from the US and exposure to oil and gas in Canada is minimal. Also, thinks the banks are smart enough to know what is going on, and will make a move to acquire the technology they are relying on. Dividend yield of 3.9%.

A good Buy at these levels. All the banks are discounting or have already discounted the oil price decline in Canada. There has been US Shorting on our bank names because of assumed real estate exposure. However, he thinks valuation is attractive on pretty much all of the banks.

TD-T vs. BNS-T. They are different in terms of the business. Both get half of their revenue from outside of Canada. BNS-T has been beaten up more because the Latin American economy is less stable than the US. It is a good entry point if you don’t have exposure to Canadian banks. It will be a 9% return including dividend for 5 years amongst volatility.

An issue he has with Canadian banks is that bad debt on commercial loans has been very, very low, so you could see an uptick in that sort of thing. Has reduced his position in this bank.

Banks have come off 5%-17% from their recent highs, and this is a great buying opportunity. You are getting them well below market multiples. He prefers using the BMO S&P TSX Equal Weight Bank Index (ZEB-T).

TD Bank (TD-T) and Enbridge (ENB-T) in a TFSA? This is a bet on the Canadian economy. Will the Canadian economy pick up in the next 5 years? Probably. If you have the patience to deal with all the ups and downs, you might be okay. However, over the next 12 months or so, he is not so positive on the banks.

Banks have been under pressure because of Short selling in the US. We had a reasonable recovery in the latter part of 2015, and then it sold off again. Somehow US Shorts got the idea that our banks have lent a whole lot of money to the oil patch and are going to lose on a whole bunch of loans. This bank has less than 1% of its loans in the energy sector. This bank has a huge US operation. Dividend yield of 3.87%.

There is downside risk on every single Canadian bank. They are superb value, and have lovely yields, but Americans have got the wind up that there is going to be a collapse in Canada, and real estate is going to kill everybody who isn’t killed by the oil patch, and banks are going to be in deep trouble. That is rubbish as Canadian banks are very well run, but have all given short term Sell signals, not deep catastrophe types of things. This has risk to about $47. At that price, he would be more than happy to buy it.

One of the brighter banks here. About 25% of earnings are coming from the US giving you the FX support. Also, it is a centrally Canadian focused bank. Sees earnings per share growing over the next couple of years at 5.8%. One of the best banks to be buying right now. In order to pick away at this, he would be writing some puts.

Dividend yield of 4.13% which they increased in 2015 x 6%-7%. This year the increase will probably be closer to 4%-5%. They are challenged like other banks by low margins and an energy portfolio. Their energy portfolio is lower because they are primarily Ontario-based, and also the big retail in the US.

Canadian Banks have been a great place to be for many years. The rate of change in the Canadian economy is likely to continue to slow as the impact of energy washes through the country. This bank has done a great job in building US assets, and their US presence is doing very, very well, but a lot of their business is in Canada. If the strong part you want to target is the US, then target a US bank. He would suggest Wells Fargo (WFC-N) which has a significant piece of the US mortgage industry. It has pulled back, but is into some longer term support.

Banking sector looks attractive from a valuation standpoint, but from a go forward economic standpoint, we have to be careful as to whether or not oil prices are going to go down 20-25 etc. That will have a ripple effect on the consumer in Western Canada, and might even move into the real estate market in central Canada. Trading at 10.6X forward earnings with a 4% dividend. He has no trouble with the cash flow and the dividend yield. Will probably grow its dividend by high single digits going forward.