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  5. FHN: What do you see in the medium term for TD? [First Horizon Corporation]
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Investment Q&A

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Q: What do you see in the medium term for TD? With a dividend approaching 5%, does it not invite investors to jump in? What am I not seeing here? If we get into, or deeper into, an unpleasant recession can you see TD share prices dropping significantly from current levels?

You have regularly note that the big banks have not historically reduced their dividends. If TD share prices do drop, the yields will be alarmingly high. It's been decades since I studied economics and I don't seem to be any smarter. Perhaps you can help.

thanks

al
Asked by alex on May 05, 2023
5i Research Answer:

We think TD is buyable. Banks have been hit hard with the crisis in the US regional bank sector, with several banks going involvent. TD has a lot of US exposure and was set to buy FHN for $16B, and this worried investors. However it has now backed off the acquisition. TD is certainly not risk-free, but at 9X earnings its valuation is low vs historical averages, and its dividend is good and quite secure in our view. Canadian banks do have very strong dividend records, with no cuts by any major bank in close to 40 years. TD may report slightly lower earnings this year, but higher EPS is expected in 2024.