royal bank

ISHARES MSCI CANADA INDEX FUND $24.49 (New York symbol EWC; buy or sell through brokers; ca.ishares.com) holds the stocks in the Morgan Stanley Capital International Canada Index. The fund has a 0.48% MER and yields 1.7%.

The index’s top holdings are Royal Bank, 7.7%; TD Bank, 7.1%; Valeant Pharmaceuticals, 5.6%; Bank of Nova Scotia, 4.9%; CN Railway, 4.4%; Suncor Energy, 3.7%; Bank of Montreal, 3.5%; Enbridge, 3.1%; and Manulife Financial, 3.0%. If you want to own a Canadian index fund, you should buy the iShares S&P/TSX 60 Index ETF (see previous page). You’ll pay about a third of the management fees.

We don’t recommend the iShares MSCI Canada Index Fund.

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ISHARES CANADIAN SELECT DIVIDEND INDEX ETF $22.48 (Toronto symbol XDV; buy or sell through brokers; ca.ishares.com) holds 30 of the highestyielding Canadian stocks. Its selections are based on dividend growth, yield and payout ratio. The weight of any one stock is limited to 10% of the ETF’s assets. The fund’s MER is 0.55%, and it yields 4.3%.

The fund’s top holdings are CIBC, 9.7%; Bank of Montreal, 6.8%; Royal Bank, 6.5%; BCE, 5.8%; Bank of Nova Scotia, 5.5%; Laurentian Bank of Canada, 5.0%; Rogers Communications, 4.5%; Manitoba Telecom, 4.4%; TD Bank, 4.4%; National Bank, 4.1%; IGM Financial, 4.0%; and Emera Inc., 3.8%.

The ETF holds 53.7% of its assets in financial stocks. The top Canadian finance stocks have sound prospects, but if you invest in this ETF, be sure to adjust the rest of your portfolio so it won’t be overly concentrated in the financial sector.

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ISHARES S&P/TSX 60 INDEX ETF $20.47 (Toronto symbol XIU; buy or sell through brokers; ca.ishares.com) is a good low-fee way to buy the top stocks on the TSX. The units are made up of stocks that represent the S&P/TSX 60 Index, which consists of the 60 largest, most heavily traded stocks on the exchange. Expenses are just 0.18% of assets, and the units yield 3.1%.

The index mostly consists of high-quality companies. However, it must ensure that all sectors are represented, so it holds a few we wouldn’t include.

The index’s top holdings are Royal Bank, 8.3%; TD Bank, 7.7%; Valeant Pharmaceuticals, 6.0%; Bank of Nova Scotia, 5.6%; CN Railway, 4.7%; Suncor Energy, 4.0%; Bank of Montreal, 3.7%; BCE, 3.6%; Enbridge, 3.3%; Manulife Financial, 3.2%; CIBC, 3.0%; Brookfield Asset Management, 2.8%; and TransCanada Corp., 2.4%.

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LINAMAR CORP., $70.26, Toronto symbol LNR, has offered to buy 100% of Montupet SA, a French maker of aluminum car parts with plants in Europe, North America and Asia. The company will pay $1.16 billion for Montupet’s shares and will assume $97.5 million of its debt. The deal’s total value—$1.25 billion—is equal to 27% of Linamar’s $4.6-billion market cap (the value of all outstanding shares). Linamar will borrow the cash it needs for this purchase, which will increase its long-term debt from $581.3 million (as of June 30, 2015) to around $1.8 billion. That’s a high, but still manageable, 39% of Linamar’s market cap. The new operations will immediately add to the company’s cash flow and earnings, helping it pay down the extra debt....

Exchange traded funds (ETFs) are set up to mirror the performance of a stock market index or subindex. They hold a more or less fixed selection of securities that represent the holdings that go into the calculation of the index or sub-index. ETFs trade on stock exchanges, just like stocks. That’s different from mutual funds, which you can only buy at the end of the day at a price that reflects the fund’s value at the close of trading. Prices of ETFs are quoted in newspaper stock tables and online. You pay brokerage commissions to buy and sell them, but their low management fees give them a cost advantage over most mutual funds....

TORONTO-DOMINION BANK, $52.91, Toronto symbol TD, reported that its earnings rose 5.4% in its fiscal 2015 third quarter, which ended July 31, 2015, to $2.3 billion from $2.2 billion a year earlier. Earnings per share rose at a slower rate of 4.3%, to $1.20 from $1.15, on more shares outstanding. These figures exclude several unusual items, such as investment gains and a recovery of costs related to a lawsuit settlement. On that basis, the latest earnings beat the consensus estimate of $1.18. Earnings at the Canadian banking division (63% of the total) rose 7.9%, thanks to strong loan demand and gains from its wealth-management and insurance businesses. The U.S. banking division’s earnings (27%) jumped 16.5%, largely because the low Canadian dollar enhanced this business’s profits. The wholesale banking division (10%) saw its earnings rise 10.6% on higher trading volumes, stronger demand for corporate loans and higher advisory fees on mergers and acquisitions....

ROYAL BANK OF CANADA $76 (Toronto symbol RY; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.4 billion; Market cap: $106.4 billion; Price-to-sales ratio: 3.2; Dividend yield: 4.1%; TSINetwork Rating: Above Average; www.rbc.com) continues to sell its less promising overseas operations as it shifts its international focus to the U.S., U.K. and Asia.

For example, it recently sold its retail banking business in the country of Suriname, South America.

It’s also selling its Swiss private banking operations to SYZ Group for an undisclosed sum. This subsidiary offers wealth management services to wealthy investors from emerging markets like Latin America, Africa and the Middle East.

Meanwhile, Royal aims to complete its purchase of Los Angeles-based City National (New York symbol CYN) by the end of 2015. City National focuses on wealthy individuals and lending to businesses in the entertainment, technology and health care industries. Royal plans to merge it with its U.S. wealth management operations.

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Successful expansion in Ireland is just one reason Great-West Lifeco gets our nod as one of Canada’s top financial blue chip stocks.

Adding strength with timely U.S. acquisitions, Royal Bank and TD Bank bolster their status as solid blue chips stocks in a sluggish economy.

These two banks are making timely acquisitions south of the border. We feel these purchases will help both profit from an improving U.S. economy, while the lower Canadian dollar enhances these businesses’ revenue and profits. ROYAL BANK OF CANADA $76 (Toronto symbol RY; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.4 billion; Market cap: $106.4 billion; Price-to-sales ratio: 3.2; Dividend yield: 4.1%; TSINetwork Rating: Above Average; www.rbc.com) continues to sell its less promising overseas operations as it shifts its international focus to the U.S., U.K. and Asia. For example, it recently sold its retail banking business in the country of Suriname, South America....