Exclusive: TD Ameritrade eyeing deals, sees dividend

By Jonathan Spicer, Joseph A. Giannone and Clare Baldwin

NEW YORK (BestGrowthStock) – The head of TD Ameritrade Holding Corp (AMTD.O: ) said it has lots of cash to make a possible acquisition and, eventually, it will “absolutely make sense” for the big online brokerage to offer a dividend.

The U.S. company is open-minded about using its $1.1 billion in cash for an acquisition, a dividend, or a share buyback, but it’s unlikely to act on any of those three options before the end of its fiscal year in September, Chief Executive Fred Tomczyk told Reuters.

“There are lots of potential acquisitions and we’ve got a lot of firepower, so we do look at that,” Tomczyk said on the sidelines of a conference here.

“Now that most of the big players are back on their feet, and there are still lots of people with problems, it is an environment where a lot of people will be looking at acquisitions again.”

TD Ameritrade is the second-largest discount brokerage but has the largest trading platform after a string of acquisitions over the last few years. It aims to have between $500 million and $1 billion in corporate cash on hand, and does not currently pay shareholders a dividend.

“There will come a time when I think a dividend absolutely makes sense for us. We’re generating so much cash, I think there comes a point in time where it’s not credible to not have one,” Tomczyk said.

The company said in October that it would consider the trio of options. Tomczyk told Reuters in November that an acquisition would be the best use of its cash cushion, and that it would consider a deal for struggling smaller rival E*Trade Financial Corp (ETFC.O: ) under the right circumstances.

“We’re interested in any deal that makes strategic and financial sense,” the CEO said on Wednesday.

E*Trade “is on a better footing today than they were a year or two ago, no question. But that doesn’t mean it’s over,” he added. “They still have their issues to work out. They’re through the worst.”

E*Trade, long rumored a takeover target, is showing signs of recovery from the mortgage market losses that have plagued it the last few years. Last month it named a new CEO. [ID:nN22154578]

While E*Trade, Charles Schwab Corp (SCHW.N: ) and Fidelity unveiled sharp price cuts for traders in January and February, TD Ameritrade was notably quiet. The fresh round of cuts mostly brought the fees of the individual-investor-focused brokers within a few dollars of each other.

Tomczyk said this round of industry price cuts “may or may not” be over, and that there has been no impact so far on TD Ameritrade’s business.

“If we see an impact, or if we start to see it hammered at us too hard, and we’re the highest priced, then we’ll respond,” he said. “We don’t see a reason to lead the industry down.”

Shares of Omaha, Nebraska-based TD Ameritrade closed up 10 cents at $20.18 on Wednesday. It reports fiscal second quarter results next week, while larger rival Schwab is set to report quarterly results on Thursday.


(Reporting by Joseph A. Giannone, Clare Baldwin and Jonathan Spicer; Editing by Gerald E. McCormick, Phil Berlowitz)

Exclusive: TD Ameritrade eyeing deals, sees dividend