Category Archives: Dividend Ideas

Why TD Bank is a Top Dividend Stock to Buy Now

Low-Risk Toronto-Dominion Bank

  • Recent Price: CAD$72.20
  • Yields: 4.1%
  • Dividend Growth of +7%
  • 5-year total returns estimate: 11-12% per year
  • Discount of ~12%

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) has a 1st or 2nd position in Canada and a sizeable business in the U.S. (about 38% of net income). It focuses on retail banking, which is perceived to be lower risk.

Recent Performance

TD’s recent performance has been stable. In the first 9 months of fiscal 2019, TD’s revenue climbed 6.8% to CAD$30.7 billion and adjusted earnings-per-share rose 5.6% to CAD$5.11. The U.S. Retail segment continues to be the key driver of growth. The provision for credit losses ratio was 0.43%, which aligns with the average of the Big Six banks.

TD’s capital position remains strong with its common equity tier 1 capital ratio at 12%, and its shareholders’ equity rose 11% from $78 billion a year ago to $86 billion today.

Strong Dividend Track Record

TD has reached our minimum yield target of 4.1%.

Source: TD Q3 2019 Quick Facts (pdf)

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CVS Health: Dividend Stock Still a Strong Buy

CVS Health (NYSE:CVS) was substantially undervalued before the 7% pop on Wednesday. It remains a strong buy for long-term investors.

Why the Pop?

CVS reported its Q2 results on Wednesday. And the stock appreciated 7% because the business performed better than expected with the company beating its own Q2 adjusted earnings per share (“EPS”) guidance by 10%. As a result, it also boosted its full-year guidance modestly by about 1.8% to $6.89-7.00.

Additionally, the Aetna integration and debt reduction have been progressing well.

Q2 Results

Adjusted revenues increased 36% to $63.4 billion, adjusted operating income rising 55% to $4 billion, adjusted EPS rising 12% to $1.89, and cash flow from operations climbing 82% to $5.3 billion. The large spike in revenues and operating income is attributable to the Aetna acquisition, which was closed on November 28, 2018.

The Leveraged Balance Sheet

The Aetna acquisition resulted in CVS’s leveraged balance sheet. At the end of Q2, CVS’s net debt arrived at $61.3 billion, leading to a D/E of 99.6% and a debt-to-assets ratio of 28%.

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1 Investing Mistake You Want To Avoid And 5 Lessons Learned

There are so many investing mistakes an investor can make. So, it’s helpful to see the mistakes others have made and learn a lesson or a few. 

One investing mistake I’ve made time and time again was booking profits on solid stocks. Some investors believe it’s not wrong as long as you make money. I agree there’s some truth in that but not the whole truth. (I’ll elaborate at the end of the article.)

There was a number of reasons why I booked profits, and I’ll illustrate with the examples below why I was wrong. 

yellow caution signs plastered on a page

The Stock Got Too Expensive?!

I sold out of Royal Bank of Canada (TSX:RY)(NYSE:RY) in August 2016. At the time, I thought the top Canadian bank was close to fully valued and I expected to be able to buy the stock back at a lower price.

From my selling point, the stock went on to deliver total returns of about 12%. What’s more? Fast forward three years, RY stock looks fairly valued to me right now trading at about 11.6 times earnings at about CAD$102 per share. 

Lesson Learned: In your lifetime of holding quality stocks, for sure there must be times in which they become undervalued, fairly valued, or overvalued. If your goal is to build a solid portfolio and use stocks, such as Royal Bank, as stable foundation stocks, you should aim to buy when they’re fairly to undervalued and hold for a long time. 

a colourful brain image made of text with emphasis on the words, feeling, habit, belief, memory, and meaning
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