Investing for TD's
Christopher is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Now that football season is here, "TD's" can only mean one thing: touchdowns. In the investing world, all of us as investors are also looking for touchdowns with our stock picks. Touchdowns in the investing world, like in football, produce winners. I have found two TD's that have a connection to those letters, and to each other, and may also produce two investing touchdowns.
The TD's that I am talking about are Toronto-Dominion Bank (NYSE: TD), which trades at $81.32 a share, and TD Ameritrade (NYSE: AMTD), whose shares can be purchased for $15.88. The interrelationship is based on the fact that Toronto-Dominion Bank owns 45.1% of TD Ameritrade ("Ameritrade"), and is precluded from purchasing more then this amount (and a majority interest) in Ameritrade until January, 2016, unless it makes a full bid for the company. The two companies also share a connection by having over 10 million combined customers.
The purchase of shares in Ameritrade have appeal as a stand alone investment whose common shares pay a reasonable 1.5% dividend yield, with capital gains potential (according to Valueline) into the range of $30-$40 per share between 2015-2017. This assumes natural growth, but acquisitions to fuel growth are also a possibility. That being said, the long-rumored take over of E*trade by Ameritrade has yet to take place.
That leaves us with Toronto-Dominion Bank. It is a well-respected Canadian bank that was founded in 1955 from the merger of two banks that were founded in 1855 and 1869, respectively. The foundation of this investment is, thus, as strong as they come. It is Canada's second largest bank in terms of assets, with operations in Canada, the United States, and other foreign countries. The market cap is a hefty $72 billion. The dividend yield is border-line high yield at 3.7%
An interesting tidbit is that other Canada banks have chosen to invest in the common shares of Toronto-Dominion Bank. These banks include the Royal Bank of Canada, with 4% of shares outstanding, and the Bank of Nova Scotia, with 2.8% of the bank's shares. This bolsters the argument that perhaps TD Bank shares belong in your portfolio, too.
If you like safe, stable value stocks, Toronto-Dominion Bank fit the bill. Book value is approximately $66.30 a share, with a price-earnings ratio of 11. In addition, TD Bank is listed on BMO Capital Markets' Top 15 Canadian Large Cap Stocks list. This is a select group of 15 stocks, selected from the BMO Capital Markets Large Cap Coverage Universe. Lastly, Tetrem Capital Management, a hedge fund focused on undervalued Canadian securities, has TD Bank as its number one holding, as of June 30, 2012, with close to 3.8 million shares.
So if you want to score some personal investing TD's, you might want to take a look at Toronto-Dominion Bank, and its cohort TD Ameritrade Holdings. Both have investment appeal in their own right. TD Ameritrade also has the potential for an overnight takeover premium, should TD Bank one day decide that having a continued minority interest is not in their shareholders' best interests.
ulysessjr has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend TD AMERITRADE Holding. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
