TD Ameritrade's Steady Growth Leads to Another Record Year

TD Ameritrade Holding Corp. (AMTD) released 2015 fourth-quarter and full-year financial results on Oct. 27, reporting more of the same relatively steady, slow growth that investors have seen in recent years. This year's results were the best ever for the company, with revenue, earnings per share, and new client assets all at record levels. 

Here's a closer look at the details. 

The numbers 
The fourth quarter's results:

And for the full year:

What happened in 2015 
TD Ameritrade isn't growing at a lightning pace, but its steady growth in assets continues to drive profits to the bottom line. Some of the highlights:

• Average client trades per day of 462,000, an activity rate of 7.1%, up 8%. Average trading activity has increased every year since 2012. 
• Net new client assets of $63 billion, for a 10% annual growth rate, up 18% from 2014. The company has grown assets at double-digit rates for seven consecutive years. 
• Interest rate-sensitive assets of $108 billion, up 8% from last year. The company estimates that a small 25-basis-point increase (that's one quarter of 1%) in short-term lending rates would be worth as much as $0.08 to $0.12 per share in incremental earnings over a full year. And while interest rates are looking unlikely to increase before 2016, eventually they will inch up, and that will boost TD Ameritrade's rate-spread income. 

The company also returned a significant amount of its record earnings per share back to investors. From the earnings presentation:

• Capital deployment -- returned around 80% of net income, excluding amortization of intangible assets through dividends and share repurchases.
• Paid $0.60 per share in cash dividends ($326 million).
• Repurchased 10.9 million shares ($364 million).

What management said 
Returning profits to shareholders is a key focus for TD Ameritrade management. The company's operations and growth strategy don't require significant excess capital, and this makes it simpler for the company to return more cash to the business owners: you. CEO Fred Tomczyk said the following on the earnings call:

"And finally, we returned approximately 80% of our net income, excluding the amortization of intangibles through a combination of dividends and share repurchases. This includes $0.60 per share in cash dividends and 10.9 million shares repurchased."

TD Ameritrade has been able to grow its regular dividend largely because of its consistent asset growth. And after another double-digit growth year, the company isn't backing down. It's stepping up activity to increase assets, particularly with high-net-worth clients. Tomczyk again:

"We are renewing our asset gathering efforts among our high net worth clients, enhancing our service model to drive engagement and retention. We are also increasing our marketing spend by $12 million to build upon the momentum we realized in 2015."

CFO Stephen Boyle reiterated the focus on asset growth and also added some thoughts on the impact of low interest rates, and how that's correlated with the steady increases in trading activity over the past six-plus years:

Our asset gathering momentum is expected to continue. It remains a top priority and we aspire to deliver an eighth consecutive year of double-digit growth. We expect the markets to remain uncertain for some time, as the fed continues to evaluate the environment for an interest rate increase. This uncertainty has generally resulted in intermittent volatility and good trading activity.

Looking ahead 
TD Ameritrade continues to steadily grow its asset base, with a solid balance of assets that generate income from fees, trading activity, and interest rate-spreads. 

And while the company doesn't have much sway over investor preference for any of these asset types, this diversity should help the company continue producing steady and growing earnings in most market conditions. And that should mean management is able to continue steadily increasing how much of those earnings it can return to investors.