royal bank

ISHARES DOW JONES CANADA SELECT DIVIDEND INDEX FUND $21.65 (Toronto symbol XDV; buy or sell through a broker; ca.ishares.com) holds 30 of the highest-yielding Canadian stocks. Its selections are based on dividend growth, yield and payout ratio. The weight of any one stock is limited to 10% of assets. The fund’s MER is 0.50%. It yields 1.9%. The fund’s top holdings are CIBC, 6.9%; Bonterra Energy Corp., 6.3%; Bank of Montreal, 5.2%; National Bank, 5.0%; TD Bank, 5.0%; AG Growth International, 4.9%; IGM Financial, 4.2%; Telus, 4.1%; Royal Bank, 4.0%; Bank of Nova Scotia, 3.9%; BCE, 3.5%; and TMX Group, 3.4%. The fund holds 52.9% of its assets in financial stocks. Utilities are next, at 22.5%. The top Canadian finance stocks have sound prospects. However, 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....

ISHARES MSCI CANADA INDEX FUND $33.63 (New York symbol EWC; buy or sell through brokers; ca.ishares.com) is like a market-cap-based index fund, but its managers try to improve performance by tinkering with the index-fund formula. They do this through their Morgan Stanley Capital International Canada Index. The fund has an MER of 0.50%. The index’s top holdings are Royal Bank, 5.8%; TD Bank, 5.0%; Suncor Energy, 5.0%; Bank of Nova Scotia, 4.4%; Potash Corp., 4.0%; Canadian Natural Resources, 3.7%; Barrick Gold, 3.6%; Teck Resources, 2.7%; Bank of Montreal, 2.5%; Goldcorp, 2.4%; CN Railway, 2.4%; Manulife Financial, 2.4%; CIBC, 2.3% and Research in Motion, 2.2%. If you want to own a Canadian index fund, you should buy the iShares S&P/TSX 60 Index Fund. You’ll pay about a third of the management fees....

TORONTO-DOMINION BANK, $83.60, Toronto symbol TD, is the first of Canada’s big five banks to raise its dividend following the 2008-2009 financial crisis. The new quarterly dividend of $0.66 a share, up 8.2% from $0.61, yields 3.2% on an annualized basis. TD also reported better-than-expected quarterly earnings this week. In the three months ended January 31, 2011, the bank’s earnings rose 11.0%, to $1.6 billion from $1.4 billion a year earlier. Earnings per share rose 8.8%, to $1.74 from $1.60, on more shares outstanding. These figures exclude several one-time items, such as gains and losses on securities the bank holds, and costs to integrate recent acquisitions in the U.S. On that basis, the latest earnings easily beat the consensus earnings estimate of $1.54 a share. More of the bank’s customers are repaying their loans on time. As a result, TD’s loan-loss provisions fell 19.9%, to $414 million from $517 million. That was the main reason for the higher earnings....

Exchange-traded funds (ETFs) may have a place in your portfolio. That’s because, unlike many other financial innovations, they don’t load you up with heavy management fees, or tie you down with high redemption charges if you decide to get out of them. Instead, they give you a low-cost, flexible, convenient alternative to mutual funds. ETFs trade on stock exchanges, just like stocks. Prices are quoted in newspaper stock tables and online. You’ll have to pay brokerage commissions to buy and sell ETFs. However, ETFs’ low management fees still give them a cost advantage over most conventional mutual funds. As well, shares are only added or removed when the underlying index changes. As a result of this low turnover, you won’t incur the regular capital-gains bills generated by the yearly distributions most conventional mutual funds pay out to unitholders....

ROYAL BANK OF CANADA $53 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.4 billion; Market cap: $74.2 billion; Price-to-sales ratio: 2.1; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.rbc.com) is Canada’s largest bank, with total assets of $726.2 billion. In its 2010 fiscal year, which ended October 31, 2010, Royal earned $5.2 billion, or $3.46 a share. That’s up 35.4% from $3.9 billion, or $2.57 a share, in fiscal 2009. The fiscal 2010 earnings figure includes a $116-million loss on the sale of one of the bank’s main holdings, U.S.-based Liberty Life Insurance Co. Without unusual items, such as the loss on Liberty Life, Royal would have earned $5.3 billion, up 9.9% from $4.9 billion a year earlier....

Canada’s big five banks have posted strong results since the 2007-2009 financial crisis. All five should have no trouble complying with new international regulations aimed at avoiding another crisis. As well, their strength is helping them buy other financial companies in the U.S. and other countries, often at bargain prices. ROYAL BANK OF CANADA $53 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.4 billion; Market cap: $74.2 billion; Price-to-sales ratio: 2.1; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.rbc.com) is Canada’s largest bank, with total assets of $726.2 billion. In its 2010 fiscal year, which ended October 31, 2010, Royal earned $5.2 billion, or $3.46 a share. That’s up 35.4% from $3.9 billion, or $2.57 a share, in fiscal 2009....

Royal Bank of Canada (Toronto symbol RY), is Canada’s largest bank, with total assets of $726.2 billion. The bank is one of the stock market investments we analyze in our Successful Investor newsletter. The bank has about 79,000 employees, and serves close to 18 million personal, business, public-sector and institutional clients through offices in Canada, the U.S. and 50 other countries around the world. In its 2010 fiscal year, which ended October 31, 2010, Royal earned $5.2 billion, or $3.46 a share. That’s up 35.4% from $3.9 billion, or $2.57 a share, in fiscal 2009....

We’ve long recommended that all Canadian investors own two or more of the big five Canadian bank stocks. That’s mainly because of their importance to Canada’s economy. The top five banks slumped deeply during the 2007-2009 market downturn, like most stocks. But since the market turnaround of March 2009, several of the top five have recovered and gone on (at least briefly) to all-time highs. Few other stock groups have done as well. (In the latest issue of Canadian Wealth Advisor, our newsletter for conservative investing, we update our buy/sell/hold advice on Bank of Nova Scotia, which is the third biggest of the big-five banks. Read on for further details.)...

We recommended five newly issued bank preferreds in our February 2009 issue. The big five Canadian banks issued these preferreds on especially attractive terms to attract investors in a time of weak stock markets. Despite rising over 10% in price, their yields are still high. As well, holders can reset the dividends at higher rates in 2014 if interest rates rise. However, the banks have the right to buy back all five shares at $25 each in 2014. In that case, you’d have a capital loss if you bought them at today’s prices. The banks may choose to buy them back if interest rates stay low and bank credit quality remains high. That would let them issue new preferreds at lower rates. All five preferreds are worth holding, but we don’t recommend them as buys at today’s prices. BANK OF NOVA SCOTIA 6.25% SERIES 26 PREFERREDS $27.89 (Toronto symbol BNS.PR.T) yield 5.6%. Hold....

In the past few years, Telus has invested heavily in its wireless networks. These upgrades have been costly, but they are paying off, particularly as more people use mobile devices to access the Internet. The shift to wireless has forced Telus to restructure its traditional phone business. One-time costs, including severance payments, have held back its earnings in the past two years. The company has completed most of these changes, so its earnings should start rising again. As well, its improving outlook is freeing up more cash for dividends. TELUS CORP. (Toronto symbols T $45 and T.A $43; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 320.7 million; Market cap: $14.4 billion; Price-to-sales ratio: 1.5; Dividend yield: 4.7%; TSINetwork Rating: Above Average; www.telus.com) is Canada’s second-largest telephone company after BCE Inc. (Toronto symbol BCE, see Updating BCE Inc., Royal Bank of Canada and Pengrowth Energy Trust)....