Wednesday, April 2, 2008

Toronto Dominion Bank purchase

Today I initiated a full position in Toronto Dominion Bank (TD). TD will now make up about 10% of my non registered portfolio. Since TD is such a widely held stock in a widely followed industry in Canada; instead of a detailed post describing my thoughts on TD, and rationale behind the purchase, and valuation, I thought I would briefly list the most important factors that went into this decision. As always, opinions and comments are appreciated.

My decision to invest in TD for the long term right now was based on:
  • industry leading retail bank in Canada, operating within an oligopoly; I am attracted to retail banking as it tends to lend itself more towards consistency, loyalty, brands, and repeatable revenue and earnings
  • the credit crisis has improved the valuation of all banks; to a certain degree the babies were thrown out with the bathwater, TD has little exposure and is 15% off it's 52 week high
  • the above point is true to a large extent with U.S. banks; I'd like to entrust TD to acquire for me skillfully and take advantage of good value in U.S. institutions
  • TD has a great history of earnings and dividend growth and currently sports a dividend pay out ratio of only 38%, and a solid yield of 3.7%


Nurse B, 911 said...

I think you made an excellent decision!!! Especially since we now have the same CDN bank exposure & can sink the ship together if all hell breaks loose, lol.

Anonymous said...

Does "initiate a position" mean "buy"?

Thicken My Wallet said...

I own TD but I am quite leery about their recent American purchase. TD Banknorth didn't do as well as people had hoped and now they are writing off the name altogether (from what I understand). That's a huge write-off in good-will.

Great Cdn. franchise. Still reserving judgment on its U.S. operations.

MG said...

glad to know I have a friend during the would be collapse of the Canadian economy Brad.

yes 'initiate a position' means buy for the first time.

I think Ed Clark knows what he is doing and I believe they are concentrating on retail. Comm. Banc. was known to have a very good retail franchise in the U.S. so they should be a good fit.

Anonymous said...

I think that's a very good purchase.

I sense that the worst in terms of panic selling is over for the Canadian financials. Some of the recent optimism seems a bit overdone, but I am starting to see a discrimination between good and not so good stocks. I contemplated buying Manulife at around 36. Well, now it's too late - it's around it's 52 week average again and I think it's steadied.

I think the downside to this stock is limited.

MG said...

manulife has been too cheap for too long, I'm not surprised to see it perking up.

I believe some the financials that have been fairly 'clean' might see some nice gains as investors ease back into financials. The environment has changed but some of the good has been tossed out with the bad.

Middle Class Millionaire said...

Welcome to the club. TD is currently about 12.5% of my portfolio and I have no intention of selling. I like Ed Clark and I think that the recent Commerce Bancorp will be a good long term purchase and the integration into TD should be relatively easy as they seem to both have a very similar culture.

dividend growth said...

Looks like TD has increased its dividends in US$ by 13% annually since 1997. That's pretty impressive.

dividend growth said...

BTW thanks for adding me to your blogroll

Lazy Ninja said...

I noted your purchase of TD over at FWF (also loved your response to the question "What is a full position?", on that same thread, by the way).

"this becomes 10% of my portfolio and my largest position, as opposed to usual where I buy about 5% and look to add later."

Just curious: why the exception for TD? Why now?

MG said...

Hi lazy,

A couple reasons to why the exception:

1. I had the money

2. I don't think TD will go far enough lower that I will be able to add in the short term.

Why now?
See my post. Banks are reasonable value right now, especially the good ones.

melchor said...

I opened a position today. 14.5% of my portfolio. I was going back and forth between TD and MFC but I needed to strengthen my position in financials plus the yield of 3.78 just makes me giddy.