Sold all RY and TD

Author sold TD after 2x gain in 3 years, citing same DDM forecast <6.5%. TD shares may be fully valued; the author’s switch to an index suggests he sees better opportunities elsewhere. Avoid TD until dividend yield or growth prospects justify a higher expected return. TD’s U.S. expansion could re-rate the stock; author may exit too early.

Author’s DDM projected less than 6.5% annual return for RY, prompting a full sale. If a disciplined value investor with a proven track record sees insufficient future returns, the stock may be overvalued relative to its dividend growth potential. Avoid RY until valuation improves to offer a >10% expected return (author’s prior threshold). Interest rate cuts could boost bank earnings; author’s model assumptions may be too conservative.

The author explicitly states he sold RY and TD to buy a TSX index ETF. If the banks’ expected returns fall below 6.5%, a broad Canadian index ETF (which includes other sectors) may offer better risk-adjusted returns. Rotation from underperforming dividend stocks into a diversified index represents a bet on the overall Canadian market. TSX is heavily weighted in financials and energy; a downturn in those sectors would hurt the ETF.