October 26, 2010 / 11:50 AM / 7 years ago

UPDATE 3-TD Ameritrade profit falls; unveils dividend

* EPS of 20 cents in fiscal Q4 vs Wall St view of 23 cents

* Announces 5-cent per-share quarterly cash dividend

* Expects mostly flat revenue, trading volumes in 2011

* Shares drop as much as 5.1 pct in morning (Revises first sentence, adds CEO and analyst comments, details on 2011 projections, updates share movement)

By Jonathan Spicer

NEW YORK, Oct 26 (Reuters) - TD Ameritrade Holding Corp AMTD.O reported a worse-than-expected profit drop and made a conservative growth prediction for the year ahead, sending its shares lower even as the big U.S. online broker unveiled its first-ever quarterly dividend.

Depressed trading volumes and low interest rates led to the 27 percent profit drop in the company’s fiscal fourth quarter.

The 5-cent quarterly dividend decision could surprise some investors, since the company had earlier this year used its deep pocket of cash to conduct a series of share buybacks. It could also signal that the company -- an aggressive buyer in the past -- is less likely to make an acquisition.

TD Ameritrade also said it expected earnings of 90 cents to $1.20 per share for its 2011 fiscal year, which began this month. Analysts on average expected $1.14 in earnings per share in fiscal 2011, according to Thomson Reuters I/B/E/S.

The broker, which runs the largest U.S. discount trading platform, said it expected mostly flat net revenue and trading volumes in 2011.

The 2011 forecast “was somewhat wider and a bit more conservative than we expected, with the level of trading activity the most significant variable,” Goldman Sachs analyst Daniel Harris wrote in a note to clients.

TD Ameritrade shares fell as much as 5.1 percent early on Tuesday morning and were still down 2.4 percent at $16.35 after about 30 minutes of Nasdaq trading.

Chief Executive Fred Tomczyk said that it was finally time to offer a dividend.

“While we continue to see a challenging and uncertain environment as we look forward, we believe our business model has demonstrated a resiliency in a very difficult environment and we continue to take an opportunistic approach to investments in growth, acquisitions, share buybacks, and now a dividend,” he said on a conference call.

TD Ameritrade earned $114.0 million, or 20 cents per share, in the fourth quarter ended on Sept. 30, down from $156.7 million, or 26 cents a share, a year earlier. Revenue was down 7 percent at $608.8 million.

Analysts on average expected Omaha, Nebraska-based TD Ameritrade to earn 23 cents per share on $619.2 million in revenue, according to I/B/E/S.

The company faces the twin pains of slow trading and low interest rates, which hamper its ability to earn fees on money market funds. Rates will likely remain near zero as the U.S. economic recovery sputters.

Fourth-quarter trading tumbled 23 percent from last year, as investors stepped back from a choppy, directionless market this summer. It was the slowest trading period since the summer of 2008, when the financial crisis began to rattle stocks, though volumes jumped 15 percent so far this month.

The 5-cent per-share cash dividend is payable on Dec. 15 to common stock holders as of Dec. 1, the company said, adding it would continue to look at share repurchases.

“They have a lot of cash on their balance sheet so they can well afford to pay a dividend,” said Michael Wong, Chicago-based equity analyst at Morningstar. “It doesn’t reduce their capacity to do an acquisition that much, if they really want one.”

Toronto-Dominion Bank TD.TO, which has a 46 percent stake in the U.S. broker, said the results would contribute C$33 million ($32 million) to its fourth-quarter results.

$1 = 1.0257 Canadian dollars (Reporting by Jonathan Spicer; Editing by Lisa Von Ahn, Dave Zimmerman and Matthew Lewis)

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