TD Bank - Too Good to Pass Up

Last week I added to my large position in TD Bank (TD) at C$41 per share. Even though TD made up a large proportion of my portfolio (about 8%), I thought the valuation level was too hard to resist. TD is the best retail Canadian bank and they derive a large portion of their earnings from Canadian retail banking. I also believe that TD's dividend is not at risk of being cut. The bank is currently yielding about 6% as of this writing.

An investment in TD or Royal Bank (RY) is similar to an investment in the Canadian economy, since these banks have a large, stable market share and derive a large proportion of their earnings from economic activity in Canada. I feel confident making this long term investment while we are visiting very low valuations due to the current credit crunch and recessionary outlook.

My three investments in TD Bank over the last year were made at C$65, C$55, and this recent tranche at C$41 per share putting my average cost base [ACB] at about C$56/share.

Comments

[cloclo:]

I hate to throw away 15% of my TD dividend as Canadian withholding tax. Moreover, when the value of Canadian currency goes down in relation to the U.S. currency, the dividend goes down. On a more personal basis, when I last went to a TD bank (Canada Trust) in Canada to exchange U.S. dollars for Canadian dollars, while on vacation last July, the bank refused to do it because I did not have an account with them. I explained I was a TD shareholder, and it make no difference. I had to change my money at the hotel.

2008 Dec 09 02:15 PM

[vreporter:]

In case you haven't got the message, the Canadian consumer is going down the tank - just later than the US. Too many better places to make your money back than averaging down.

TD is a good bank.
The stock here? No thanks!

2008 Dec 09 11:03 PM

[moneygardener:]

TD is indeed a good bank. Their Canadian retail franchise is a step above. Canadain consumers are seeing rough times but this is prices into the stock at current levels. 6% yield that I consider to be relatively safe makes me really not care too much about the next few years. The share price can fluctuate but I'll be happy collecting my dividends and knowing that TD will excel long term. It is really a proxy on the Canadian economy which will recover mid-long term.

2008 Dec 10 03:17 PM

[CdnVisitor:]

You don't have to "throw away" the 15%, you can recover it by filing Form 1116 with your 1040. Also when in Canada use your US debit card to withdraw C$ from an ATM and you will get a much better rate than if you went to a teller.


On Dec 09 02:15 PM cloclo wrote:

> I hate to throw away 15% of my TD dividend as Canadian withholding
> tax. Moreover, when the value of Canadian currency goes down in relation
> to the U.S. currency, the dividend goes down. On a more personal
> basis, when I last went to a TD bank (Canada Trust) in Canada to
> exchange U.S. dollars for Canadian dollars, while on vacation last
> July, the bank refused to do it because I did not have an account
> with them. I explained I was a TD shareholder, and it make no difference.
> I had to change my money at the hotel.

2008 Dec 11 12:05 PM

[flapjack:]

Owning TD is not a bet on the Canadian economy, not a pure play play anyway. Its US banking operation - just its US assets - is the 17th largest bank in the states with $US 118B in assets. Between that and their 40% stake in TD Ameritrade, you're looking at net income in '09 of a billion dollars in the United States alone. Everyone is watching something else - the stock price, the ongoing crisis, etc and are missing the real story with this stock, which is that it is ideally positioned for growth in the only place a Canadian bank can grow - the US market.

2008 Dec 16 10:24 AM

[moneygardener:]

You could argue that the Canadian economy is a bet on the U.S. economy.

2008 Dec 31 08:25 AM