This Canadian Giant Still Has Room to Grow in the U.S.

Toronto-Dominion's prospects in Canada aren’t so bad, but there's more growth to be found stateside

By Richard Band, Editor, Profitable Investing
Toronto-Dominion Bank (TD)

Source: Mike Mozart via Flickr (Modified)

Toronto-Dominon Bank (NYSE: TD) just released its first-quarter earnings for the quarter ending Jan. 31, 2018. They came in stronger than the expectations for TD stock.

TD Bank is one of Canada’s Big Five banks, the largest banks in the Great White North. But TD has a much greater reach than most of its four other counterparts. While they have little to no exposure in the U.S. retail banking and securities markets, TD is much more involved on this side of the border.

It is a majority owner in TD Ameritrade on the brokerage side and TD Bank on the retail and commercial banking side. It has nearly 1,300 locations on the U.S. East Coast at this point.

And the most interesting tidbit from its recent Q1 report was that its operations in the U.S. are the ones that add most to TD’s bottom line.

U.S. retail net income (including TD Ameritrade) on an adjusted basis was up 28% compared to the same quarter last year. For just the banking arm alone, was up 23%. Canadian retail net income was up 12%.

That means TD’s U.S. business was nearly double the business in Canada. And at this point, TD isn’t even a national brand in the U.S. It has strategically moved from across the border in the Northeast market to all the way down to Florida, where the Canadian ‘snow birds’ go to thaw out in the winter.

And from the numbers, this strategy is working.

TD Stock Fundamentals Looks Strong

What’s more, TD is optimistic about the full year, although officials wouldn’t put exact numbers to their optimism other than to say that “adjusted earnings growth for the full year may exceed our medium-term targets.”

Bear in mind, that TD isn’t just a scrappy up-and-comer. It has a $108 billion market cap, so its double-digit growth is impressive. It may not be as big as the big national banks in the U.S., but it’s bigger by half or more than most regional banks.

The point is, TD offers the stability of a big bank with the growth of a smaller bank since its Canadian operations are its foundation and its U.S operations are its growth arm.

Also, don’t forget that TD is still delivering a nearly 3.6% dividend. Even with the most optimistic growth forecasts that’s still is an inflation-beating yield.

Right now, the new tariff talk out of Washington seems to be focused on our NAFTA partners Canada and Mexico. And with the pro-tariff wing of the White House holding sway, that may chill any optimism in Canadian shares at this point.

But that’s an opportunity for savvy buyers. TD is a port in the storm, so any scared money will move there. And its strength in the U.S. market gives it plenty of room to pivot if any of this tariff talk turns into action.

Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won seven Best Financial Advisory awards from the Newsletter and Electronic Publishers Foundation.

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