Then and Now – TD Bank

Then and Now – TD Bank

Welcome to another Then and Now post, a continuation of my series where I revisit some older blogposts and either rip them to shreds (because my thinking has totally changed on such subjects) or I’ll confirm my position on various personal finance topics or specific stock and ETF investments.

Today’s post is about a dividend favourite with many DIY investors in Canada: TD Bank.

You can read about my previous Then and Now posts on certain stocks (good and bad!) at the end of this post.

Then and Now – TD Bank

To start off, I started to write about TD Bank well over a decade ago on this site. I suggested it might be a good bank stock to own by screening some the higher cost mutual funds available back in 2011, that consistently owned this company as part of their top market cap holdings. 

To that point, skimming some of the biggest mutual funds and low-cost ETFs in Canada can help make stock selection somewhat easy.

Canadian Dividend Stock Selection Made Easy

Of course, there are real metrics you should consider for any stock selection. Some of those are:

• Low/lower debt or at least very manageable debt over time. 
• Modest dividend payout ratio, where applicable. 
• Does the company buyback shares?
• Modest P/E ratio.
• Growing Earnings Per Share (EPS) – demonstrating profitability.
• Higher cashflow / free cash flow over time.

In more tangible terms, why I bolded the metric above, stocks with higher EPS rates are generally more desired by investors than those with slower or lower rates. You might want to check out what really drives stock returns below:

What drives stock returns?

Of course, you should likely avoid just picking stocks for the fun of it, skimming work only, by avoiding some of these mistakes:

• Buying a stock on a hunch.
• Buying a stock because it’s popular at the time.
• Investing in a company and not knowing that its debt, dividend payout ratio, or the P/E.
• Investing in a company that’s not demonstrating a trend for higher profits.
• Thinking short-term about any one stock.

Then – TD Bank

After I bought my first dividend paying stock some 15 years ago, my attention turned to owning new / more dividend paying companies in 2009. I started buying Canadian bank stocks, and TD was one of them. At the time, I also got some BMO stock with some others. I recall with my purchases that bank stocks would make a great home in our registered accounts (like TFSAs, RRSPs) because you can reinvest dividends tax-free or tax-deferred respectively. 

I snatched up some TD Bank stock starting in mid-2009 since I wanted to participate in the capital growth and dividend raises it has historically delivered shareholders moving forward – even though it was a very trying time to be a shareholder coming out of the Great Financial Crisis. I did have convinction however that higher growth and higher dividend raises might occur in the future coming out of this financial storm. I was confident TD would grow through acquisitions and make more inroads into the U.S. market specifically.

(Note: TD is one such stock that has paid dividends for generations since 1857).

I recall buying some TD stock around $30 per share. 

Now – TD Bank

Since 2009, I’ve been buying more TD stock, periodically at least. 

I retained my convinction in TD years later when I shared some equities (including low-cost, diversified ETFs) were built to last for your portfolio.

I continued to buy more TD stock years later in 2018. 

I nibbled again on TD stock in 2022, among others, when I felt opportunities were good.

We now own hundreds and hundreds of shares. 

Index investors will argue you can avoid all individual stock selection risk and simply ride the market returns in Canada, that include TD, by owning a low-cost, diversified ETF. Very true!

However, I’ve decided in unbundle my Canadian dividend ETF for income (and growth) and never look back. 

Have you considered unbundling your Canadian ETF for income?

Indexing is great, yes, but in Canada, I believe you can take some individual stock risk for more reward.

Your mileage may vary. 

Then and Now – TD Bank Summary

The big banking crisis brewing in the U.S. could be just beginning. For sure, the U.S. has endured quite a few regional bank failures over the years and Silicon Valley Bank (SVB) is just the latest to make major headlines – but it won’t be the last. TD Bank, arguably Canada’s most American bank has been in the news too – shorted by some investors and analysts. 

Investors with a long-term buy and hold timeframe, have little to worry about, according to this post and expert strategist.

“No Canadian should say ‘Holy s–t, TD is the most shorted bank! Should I get my money out of TD?’” said Barry Schwartz, chief investment officer at Toronto-based Baskin Wealth Management. “I think we’re trying to create a story where there isn’t one, we’re trying to backfill a narrative.”

I feel the same.  

My returns with TD have been very good over the years. Total returns are meaningful for sure…

Source: Portfolio Visualizer

Will that continue?

Hopefully!

That said, I do expect individual stocks to either exceed or even lag the index from time to time.

That’s what individual stocks do.

Yet I’m more focused on our collection of stocks (even the odd one that cuts dividends! – that’s you Algonquin Power (AQN)) that should continue to reward us as shareholders over time via meaningful total return (i.e., the sum of dividends and capital gains).

So, I’ll keep you posted on what I/we own, why, even when we hit a few bumpy spots along the investing journey.

Thanks for reading.

Mark

 

Selected Then and Now posts and stock ownership:

I recently posted this Then and Now update about Telus. 

Check out my 2022 update with Waste Connections (WCN). 

I’ve owned Canadian National Railway (CNR) since 2016.

I started to own Canadian Apartment REIT (CAR.UN) in 2013 – and still own it.

How long I’ve owned Royal Bank (RY) and why.

My 10-year+ ownership in Procter & Gamble.