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TD Canada Trust bank at Yonge and Eglinton, Toronto. August 27, 2013. (Gloria Nieto/The Globe and Mail)
TD Canada Trust bank at Yonge and Eglinton, Toronto. August 27, 2013. (Gloria Nieto/The Globe and Mail)

Schizas’ Mailbag

Charts suggest TD Bank shares will continue to climb Add to ...

Hey Lou,

Would you currently invest in TD? How about after the split?

Thank you for your time and keep up the  good work on AM640.

Ciao

Anthony


Hey Anthony,

Thanks for the assignment and your support. Glad that you enjoy the programming from Talk Radio AM640. This will be the second time that I scrutinize the situation at the Toronto-Dominion Bank (TD-TSX). The last time was on July 25, 2012, when the shares were trading for $78.43 while offering a dividend yield of 3.67 per cent. Massimo wanted to know if the stock was a good buy at the prevailing price. The research conducted on his behalf led me to recommend an accumulation strategy and that he take advantage of the bank’s dividend reinvestment program.

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In hindsight that was the right call. The shares have moved up nicely in addition to the dividend. Blue chip stocks like TD offer a long history of earnings and dividend growth which provide a solid foundation for long term wealth creation.

As far as the stock split is concerned you should treat it as a neutral event. If you buy the shares now you will end up with twice the number of shares but at half the price. If you buy after the split you will end up in the same place financially.

A further test of the charts will help me form an updated opinion on TD.

The three-year chart demonstrates the lift that started in June of 2013 as the stock retested support along the 200-day moving average, formed a double bottom and then caught a bounce to their current level.  My only concern at this point is that the rapid advance has not built a lot of support along the way.  The company will report Q1 2014 on February 27 and currently offers a 3.51 per cent dividend yield.

The six-month chart depicts the test of support along the 50-day moving average in December of 2013 and again in January of 2014. In both instances the MACD and the RSI signalled the pullback. At this point there is nothing on the chart to suggest that a trend reversal is developing. Based on the information at hand, I continue to recommend an accumulation strategy. Make TD part of your long-term strategy and buy shares with your investable capital while reinvesting the dividend.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lschizas@globeandmail.com.

 

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