The Toronto-Dominion Bank (NYSE:TD) and Royal Bank of Canada (NYSE:RY) are both large-cap finance companies, but which is the superior investment? We will compare the two companies based on the strength of their dividends, valuation, institutional ownership, risk, profitability, earnings and analyst recommendations.
Analyst Ratings
This is a breakdown of recent recommendations for The Toronto-Dominion Bank and Royal Bank of Canada, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| The Toronto-Dominion Bank | 4 | 5 | 3 | 0 | 1.92 |
| Royal Bank of Canada | 0 | 4 | 10 | 0 | 2.71 |
The Toronto-Dominion Bank presently has a consensus target price of $75.25, indicating a potential upside of 22.46%. Royal Bank of Canada has a consensus target price of $112.9108, indicating a potential upside of 30.10%. Given Royal Bank of Canada's stronger consensus rating and higher possible upside, analysts clearly believe Royal Bank of Canada is more favorable than The Toronto-Dominion Bank.
Dividends
The Toronto-Dominion Bank pays an annual dividend of $2.48 per share and has a dividend yield of 4.0%. Royal Bank of Canada pays an annual dividend of $3.39 per share and has a dividend yield of 3.9%. The Toronto-Dominion Bank pays out 62.2% of its earnings in the form of a dividend. Royal Bank of Canada pays out 57.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. The Toronto-Dominion Bank has increased its dividend for 1 consecutive years and Royal Bank of Canada has increased its dividend for 1 consecutive years.
Earnings & Valuation
This table compares The Toronto-Dominion Bank and Royal Bank of Canada's top-line revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| The Toronto-Dominion Bank | $39.92 billion | 2.80 | $8.85 billion | $3.99 | 15.40 |
| Royal Bank of Canada | $45.54 billion | 2.71 | $8.50 billion | $5.93 | 14.64 |
The Toronto-Dominion Bank has higher earnings, but lower revenue than Royal Bank of Canada. Royal Bank of Canada is trading at a lower price-to-earnings ratio than The Toronto-Dominion Bank, indicating that it is currently the more affordable of the two stocks.
Volatility and Risk
The Toronto-Dominion Bank has a beta of 1.04, indicating that its stock price is 4% more volatile than the S&P 500. Comparatively, Royal Bank of Canada has a beta of 0.99, indicating that its stock price is 1% less volatile than the S&P 500.
Insider & Institutional Ownership
48.0% of The Toronto-Dominion Bank shares are owned by institutional investors. Comparatively, 40.8% of Royal Bank of Canada shares are owned by institutional investors. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.
Profitability
This table compares The Toronto-Dominion Bank and Royal Bank of Canada's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| The Toronto-Dominion Bank | 22.23% | 11.63% | 0.62% |
| Royal Bank of Canada | 18.78% | 14.84% | 0.73% |
Summary
Royal Bank of Canada beats The Toronto-Dominion Bank on 9 of the 15 factors compared between the two stocks.
