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TD Ameritrade (
AMTD) has been loving every minute of 2013's rally in stocks. Higher equity prices translate into bigger commissions and margin fees for brokers, so it's no surprise that AMTD's share price has been doing even better than the S&P all the way up. All of that fundamental success should translate into a dividend boost for shareholders.
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Investors haven't been big fans of TD Ameritrade in the last few years. Low rates have been a major hurdle for the firm because they dramatically limit conventional income sources like float interest. At the same time, record low household participation in the stock market has harangued AMTD's ability to earn fees. But that's finally turning around. While households still don't have exposure to stocks by and large, margin debt it at record high levels right now as traders bet on both sides of the market, and the investors who do have exposure to stocks right now are picking up their trading.
Both of those factors have helped to reverse the downward trend in TD Ameritrades revenues. The firm's balance sheet looks even better right now - with around $5.6 billion in net cash on the books, AMTD is covering nearly a third of its market capitalization in cold hard cash. That greatly reduces the firm's risk for investors right now, and it provides a source for dividend payouts.
Currently, AMTD pays a 9-cent dividend. Expect that number to get boosted in the next quarter.
To see all of this week's Rocket Stocks in action, check out
the Rocket Stocks portfolio at Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.