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Toronto-Dominion Bank (TSX: TD) is one of Canada's largest banks and operates into three business segments: Canadian retail banking, U.S. retail banking, and wholesale banking. The bank's U.S. operations span from Maine to Florida, with a strong presence in the Northeast. It also has a 42% ownership stake in TD Ameritrade, a discount brokerage.
Key Highlights
Source: Company Filing
Source: Company Filing
Source: Company Presentation
Source: Company Filing
Risks associated with investment
The bank is principally susceptible to Interest rate volatility; any negative movement could have a significant negative impact on the group's health, including a loss in average asset under management, increased redemption demands, a decline in core earnings, and other factors. Moreover, the banking system reflects the current health of any economy, and uncertain economic outlook may lead to higher provisions for losses and would take a toll on profitability.
Financial Overview of Q1 2022
Source: Company Filing
Top-10 Shareholders
The top 10 shareholders have been highlighted in the table, which forms around 23.26% of the total shareholding. The Vanguard Group, Inc. and RBC Wealth Management, International hold the company's maximum interests at 3.37% and 2.90%, respectively. The company's institutional ownership stood at 57.37%. Higher institutional holding boosts the confidence in the mind of retail investors.
Valuation Methodology (Illustrative): Price to Book Value
Analysis by Kalkine Group
Stock recommendation
Toronto-Dominion Bank started the year strong, delivering revenue growth across all the business segments as customer activity gained additional momentum. With a focus on growth, the bank is continuously making investments in technology and new capabilities, positioning well to meet the customers' and clients' evolving needs. Additionally, its assets under administration (AUA) from the Canadian Retail segment witnessed a growth of 15% on y-o-y basis to CAD 557 billion in Q1FY22, is appreciable.
Furthermore, despite the challenging operating environment, the group continues to distribute elevated dividend, which is encouraging from an income investor’s point of view. At the last traded price, the stock was offering a dividend yield of 3.825%, which is significantly higher, considering the current interest rate environment in the country. Therefore, based on the above rationales and valuation, we recommend a "Buy" rating on the stock at the at the closing price of CAD 93.06 as on April 25, 2022. Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
One-Year Technical Price Chart (as on April 25, 2022). Source: REFINITIV, Analysis by Kalkine Group
Technical Analysis Summary
Disclaimer
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