The Canadian banks are slashing staff, taking restructuring charges, and warning about FinTech threats.

Investors might be tempted to avoid the sector altogether, but share prices are holding up well, and some analysts view the moves as a sign that the industry is proactively tackling the challenges.

Let’s take a look at Toronto-Dominion Bank (TSX:TD)(NYSE:TD) to see if it should be your dividend portfolio.


Earlier this year TD took a restructuring charge of $228 million as it announced plans to go through the organization and look for ways to reduce costs and improve efficiency.

At the end of April, TD had already reduced staff by more than 300 when compared to its reported numbers for the first quarter of 2015. A recent Reuters report said TD is now cutting more jobs as a part of the next phase of the restructuring process.

TD is facing a low-growth economic environment coupled with the threat of non-bank mobile payment competitors. From an investor’s perspective, the company appears to be making the necessary moves to stay competitive and protect earnings over the long haul.

Earnings strength

For its third quarter, which ended July 31, TD reported adjusted net income of $2.29 billion, a 4% increase over Q3 2014.

The solid performance is attributable to the company’s retail operations.

TD is often cited as having the best personal and commercial banking franchise in Canada. The group delivered $1.6 billion of the Q3 earnings, an 8% rise over the same period last year.

The bank also has a large U.S.-based retail operation with more than 1,300 branches that run from Maine right down the east coast to Florida.

The American division earned $450 million in the third quarter, about the same as it did in Q3 2014. With the ongoing restructuring efforts, investors should see improvements in the U.S. segment.


Bank investors are concerned about Canada’s sky-high housing prices and the struggling energy sector.

TD finished the third quarter with $241 billion in Canadian residential mortgage loans. Insured mortgages represent 57% of the portfolio, and the loan-to-value ratio on the rest is 59%.

The market would have to pull back significantly over a short period of time before TD would see any material losses on the mortgage portfolio. Most analysts expect the bubble to deflate gradually.

As for energy loans, TD has less than 1% of its overall loan book exposed to oil and gas companies.

Dividend safety

TD’s dividend remains rock solid. At $2.04 per share, investors get a tidy 3.8% yield. The bank has a long history of dividend growth, and that should continue, but the size and frequency of the increases might not be as aggressive over the next few years as they have been since the end of the financial crisis.

Is this a good time to buy?

TD was really cheap in late August, but the stock still trades at a reasonable 11.2 times forward earnings. If you have a long-term investment strategy, TD is a solid bet at the current price and deserves to be an anchor holding in a balanced portfolio.

Are all the banks still safe bets?

Canadian banks are considered must-have investments. After all, they're very stable, well capitalized, and face limited competition. That said, there are concerns for the banks and their investors.

In this FREE report, we cover everything you need to know about Canada's Big Five, whether you're already an investor or considering buying shares.

Simply click here to receive your special FREE report, "What Every Bank Shareholder MUST Know."


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Fool contributor Andrew Walker has no position in any stocks mentioned.