Speaking of TD – This deal is dropping 13.4% of SCHW in their laps at about $7Bn and that's way up from what they valued their remaining stake in AMTD. TD is a good value anyway at $55.60, which is $100Bn with a $2.24 (4%) Dividend and they might spit out a special dividend down the road.
Even if these are Canadian Dollars, TD is way undervalued:
| Year End 31st Oct | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020E | 2021E | CAGR / Avg | |
| C$m | 29,961 | 31,426 | 34,315 | 36,202 | 38,892 | 41,065 | 40,947 | 43,418 | +6.5% | |
| C$m | 9,075 | 9,170 | 10,646 | 12,321 | 13,773 | 13,229 | +7.8% | |||
| C$m | 7,776 | 7,912 | 8,821 | 10,396 | 11,262 | 11,668 | 12,437 | 13,123 | +8.5% | |
| C$ | 4.14 | 4.21 | 4.67 | 5.50 | 6.01 | 6.25 | +8.6% | |||
| C$ | 4.15 | 4.52 | 4.74 | 5.50 | 6.04 | 6.33 | 6.88 | 7.33 | +8.8% | |
| % | +18.3 | +9.0 | +4.7 | +16.1 | +9.8 | +4.8 | +8.81 | +6.51 | ||
| x | 11.5 | 10.6 | 9.93 | |||||||
| x | 1.31 | 1.62 | 0.70 | |||||||
| Profitability | ||||||||||
So, as an eventual LTP play, we can put TD in the STP but let's also do a Dividend play:
For the Dividend Portfolio:
- Sell 5 TD July $57.50 puts for $4.10 ($2,050)
We're kind of full but I'd sell something else to buy TD for net $53.40.
For the STP:
- Sell 10 TD July $55 puts for $2.65 ($2,650)
- Buy 15 TD July $52.50 calls for $4 ($6,000)
- Sell 15 TD July $57.50 calls for $1.20 ($1,800)
That's net $1,550 on the $7,500 spread so $5,950 (383%) upside potential in just 218 days if all goes well and, if it doesn't, we're very happy to establish a bigger TD position in the LTP. Ordinary Margin is $10,500 – not terribly efficient but very manageable.
