TD Bank (TSX: TD) is the second largest of the Big Six Canadian banks and the second-largest stock on the TSX by total market capitalization. Today, I want to look at the bank’s recent performance and discuss how its prospects look going forward. Moreover, I want to target a top dividend beast that looks undervalued at the time of this writing. Let’s jump in.
Here’s why I’m looking beyond TD Bank stock right now
Shares of TD Bank have climbed 4.1% month over month as of close on Monday, July 17. Meanwhile, the top bank stock is still down 3.9% so far in 2023. Its shares are up 5.7% in the year-over-year period. Investors can see more of its recent performance by playing with the interactive price chart below.
This top bank released its second-quarter (Q2) fiscal 2023 earnings on May 25. In the first half of fiscal 2023, TD Bank reported adjusted net income of $7.90 billion, or $4.17 per diluted share — up from $7.54 billion or $4.17 per diluted share in the first half of fiscal 2022. The bank has continued to see positive results in its Canadian and United States Personal and Commercial Banking segments on the back of higher margins and volume growth as interest rates are on the rise.
Despite the increase in net interest income, TD Bank and the broader financial space are facing big challenges in the current climate. That is why I’m looking elsewhere in the summer of 2023.
This telecom dividend beast is my chosen alternative today
Cogeco Communications (TSX: CCA) is the dividend beast I’m looking to snatch up over TD Bank right now. This Montreal-based communications corporation operates throughout North America. Shares of this dividend beast have increased marginally over the past month. The dividend stock has plunged 15% in the year-to-date period.
The company unveiled its third-quarter fiscal 2023 earnings last week on July 13. Total revenue rose 1.9% year over year to $741 million. That was powered by Canadian telecommunications revenue growth of 3.2%, as it credited “the cumulative effect of high-speed Internet service additions.” EBITDA stands for earnings before interest, taxes, depreciation, and amortization. Cogeco reported adjusted EBITDA of $351 million in the third quarter of fiscal 2023 — up 1.1% from $341 million in the previous year. Moreover, adjusted profit rose 2.1% to $103 million, and adjusted diluted earnings per share jumped 6.8% to $2.34.
In the first nine months of fiscal 2023, revenues increased 3% to $2.24 billion. Meanwhile, adjusted EBITDA climbed 2.3% to $1.06 billion.
Why this dividend beast looks dirt cheap
Shares of this dividend beast currently possess a very attractive price-to-earnings ratio of 7.3. That puts Cogeco Communications in very favourable value territory compared to its industry peers. Cogeco Communications last paid out a quarterly distribution of $0.776 per share. That represents a very solid 4.6% yield. Better yet, Cogeco Communications has achieved 19 consecutive years of dividend growth.
