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Strong Q1 Results Prove Why Toronto-Dominion Bank Is the Best Canadian Bank Stock

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) posted its first-quarter results on Thursday, as the bank continued to show strong growth, and it also hit a record level of earnings from its operations south of the border.

TD beat analyst expectations for the quarter and rebounded from a Q4 that fell short of estimates. However, let’s have a look ourselves at just how the bank did and see if it’s a good buy today.

The highlights

Sales of $9.4 billion in Q1 were up only 2.6% from last year, while net income was actually down 7%. However, on an adjusted-earnings basis, the company reported a net income of $2.9 billion, which was up more than 15% from last year’s total of $2.6 billion.

At first glance, the quarter does not look as strong as it sounded, so let’s take a closer look at how each of the segments did.

Breakdown by segment

In its Canadian retail operations, TD’s revenues were up 7%, as the bank continues to benefit from rising interest rates and a growing economy. Net income for the segment totaled $1.8 billion and was up over 12% from last year.

In the U.S. retail segment, the bank’s sales rose 5%, as it benefited from higher volumes and margins. Net income for the quarter was $952 million and up 19% from a profit of $800 million in 2017. A big reason for the improvement in the bottom line came as a result of a lower provision for taxes, which added over $40 million to the segment’s overall profitability.

TD’s wholesale banking segment also saw a modest increase in its top line with sales rising by 2%, while profits were up by 4%.

While at an operational level, TD did well, it was its corporate segment that brought down the overall performance for the bank. The segment incurred a loss of $634 million this past quarter compared to just $100 million a year ago.

Like we’ve seen with other banks, the U.S. tax reforms had a big impact on TD’s overall results and were responsible for much of the decline. However, with a significant presence south of the border, TD is expected to benefit the most of the big banks with an estimated $300 million expected to be added to its net income this year as a result of the reduced tax rates.

Dividend hiked 12%

TD also announced in its earnings report that its quarterly dividend would be rising to $0.67, which is a $0.07 increase from the current payout. The company has a strong track record for increasing its dividends, and in five years the bank’s payments have grown by 65% for a compounded annual growth rate of 11%.

Why TD is a good buy today

The U.S. economy is continuing to grow, and corporate tax cuts will only help accelerate that. TD stands to be a big benefactor of that growth and with Canadian operations also doing well, there’s a lot to like about where TD is today.

Not only will you secure a strong dividend stock that will grow over the years, but there are also excellent growth opportunities that can help the stock appreciate in value as well.

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Fool contributor David Jagielski has no position in any of the stocks mentioned.

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