Toronto-Dominion Bank (TSX:TD)(NYSE:TD), the largest bank in Canada by assets, released first-quarter earnings before the market opened on February 26, and its stock has responded by making a slight move to the upside.
The company’s stock still sits more than 6% below its 52-week high of $58.20 reached in August 2014, so let’s take a closer look at the results to determine if we should consider initiating long-term positions today, or if we should wait for a better entry point in the trading sessions ahead.
The first-quarter results are in
Here’s a summary of TD Bank’s first-quarter earnings results compared to its results in the same period a year ago.
|Metric||Q1 2015||Q1 2014|
|Adjusted Earnings Per Share||$1.12||$1.06|
|Adjusted Revenue||$7.61 billion||$7.31 billion|
Source: Toronto-Dominion Bank
TD Bank’s adjusted earnings per share increased 5.7% and its revenue increased 4.1% compared to the first quarter of fiscal 2014. The company’s strong earnings per share growth can be attributed to adjusted net income increasing 4.9% to $2.12 billion, driven by increases in both of its major segments, including 8.1% growth to $1.45 billion in its Canadian Retail Banking segment and 27% growth to $625 million in its U.S. Retail Banking segment.
It also achieved strong revenue growth in both of its major segments, including 5.8% growth to $4.9 billion in its Canadian Retail Banking Segment and 7.5% growth to $2.22 billion in its U.S. Retail Banking segment.
Here are eight other notable statistics and updates from the report compared to the year-ago period:
- Total assets increased 17.4% to $1.08 trillion
- Total loans managed, net of loans securitized, increased 12% to $65 billion
- Total deposits increased 19.7% to $77 billion
- Net interest income increased 6% to $4.56 billion
- Adjusted non-interest income increased 1.4% to $3.05 billion
- Adjusted efficiency ratio improved 130 basis points to 53.8%
- Adjusted return on common equity contracted 110 basis points to 15.1%
- Book value per share increased 17.4% to $31.60
TD Bank also announced an 8.5% increase to its quarterly dividend to $0.51 per share, or $2.04 annually. The next payment will come on April 30 to shareholders of record at the close of business on April 7.
Should you invest in TD Bank today?
The increased demand for TD Bank’s financial products and services led it to a very strong first-quarter performance. The company’s stock has responded to the earnings release by making a slight move to the upside.
I think TD Bank’s stock represents a great long-term investment opportunity today, even after the slight post-earnings pop, because it still trades at very attractive valuations and pays a high dividend.
First, TD Bank’s stock trades at just 12.1 times fiscal 2015’s estimated earnings per share of $4.50, only 11.4 times fiscal 2016’s estimated earnings per share of $4.81, and a mere 1.7 times its book value per share of $31.60.
Second, the company now pays an annual dividend of $2.04 per share, giving its stock a bountiful 3.7% yield, and I think this makes it both a value and dividend play today.
With all of the information above in mind, I think Toronto-Dominion Bank represents the best long-term investment opportunity in the financial sector today. Foolish investors should take a closer look and strongly consider initiating positions.