royal bank

ISHARES DIVIDEND INDEX FUND $16.92 (Toronto symbol XDV; buy or sell through a broker) currently holds the 30 highest yielding Canadian stocks. Stocks are included in the index based on their dividend growth, yield and average payout ratio. The weight of any one stock in the fund is limited to 10% of the fund’s assets. iShares Dividend Index Fund’s MER is 0.50%. The fund now yields 4.8%. The fund’s top holdings are: National Bank of Canada, 8.9%; Bank of Montreal, 8.0%; CIBC at 7.2%; TD Bank, 6.3%; IGM Financial, 5.0%; Bank of Nova Scotia, 5.0%; Royal Bank of Canada, 4.9%; Manitoba Telecom 4.6%; TMX Group, 3.6%; Sun Life Financial, 3.2%; Power Financial Corp., 3.2%; Telus Corp., 3.1%; and Russel Metals, 2.8%....

Cyberplex, $1.70, symbol CX on Toronto (Shares outstanding: 64.8 million; Market cap: $110.1 million), sells a service that matches advertisers with electronic publishers. Cyberplex links advertisers’ campaigns with its affiliates. These include web-site operators, bloggers and email marketers. Advertisers only pay if Cyberplex’s campaigns prompt users to do something, such as a fill out an online form or register at an advertiser’s web site. Cyberplex has a number of major companies as clients, including FTD, Xerox, Sony Canada, IAC, Atlantic Lottery Corporation, Vista Print, Aecon, Ontario Power Generation, Scotia Bank and Royal Bank of Canada. In the three months ended March 31, 2009, Cyberplex’s revenue jumped 307%, to $32.1 million from $7.9 million a year earlier. Earnings in the latest quarter were $4.1 million, or $0.08 a share, compared to $51,858, or nil per share. The company has no long-term debt. It recently issued new shares at $1.60 each. This raised $17.2 million....

BANK OF NOVA SCOTIA $40 reported record revenue in its latest quarter, despite the recession. Revenue rose 13.4%, to $3.6 billion from $3.2 billion a year earlier. However, earnings per share fell 16.5%, to $0.81 from $0.97, as loan-loss provisions jumped 219.6%. Still, the bank is in a good position to increase its profits as the economy improves. Best Buy. ROYAL BANK OF CANADA $46 lost $50 million, or $0.07 a share, in the three months ended April 30, 2009. This figure includes a $1-billion writedown of goodwill related to the American banks that Royal bought over the past few years. The slow U.S. housing market and economy have driven down the goodwill related to these purchases. Without this writedown, Royal would have earned $950 million, up 2.4% from $928 million a year earlier. Per-share earnings fell 10%, to $0.63 from $0.70, on more shares outstanding. Buy. TELUS CORP. $32 has won a $31.5-million expansion of its contract with the Montreal Regional Health Authority. Telus will speed up the conversion of patient records from paper to electronic form. This is a small sum next to Telus’s $9.7 billion in annual revenue, but electronic record conversion is a fast-growing field. Buy.

We continue to recommend that all investors own at least two of Canada’s big-five banks – Bank of Montreal, Royal Bank, CIBC, TD Bank and Bank of Nova Scotia. These are key safe investments for a portfolio. But these should not be the extent of your financial holdings. It is also essential to diversity within each economic sector. Other types of financial investments, such as non-bank financial companies, should play a role in your portfolio. Non-bank financial companies include property and casualty insurance companies, mutual fund companies, wealth management companies, mortgage lenders and more. It also includes life insurance companies. The best of these can be safe investments in a well-balanced portfolio. Recently, Canadian life-insurance stocks have been held back by investor concerns that the recession will continue to hurt their profits....

UNITED CORPORATIONS $46.50 (Toronto symbol UNC) (165 University Avenue, 10th Floor, Toronto, Ontario M5H 3B8. 416-947-2583. Buy or sell through a broker) invests in a wide variety of average- to above-average quality Canadian and foreign stocks. United Corporations’ $676.1-million portfolio is invested 35.3% in Canadian equities, 23.7% in the U.S., 20.2% in Europe, 12.5% in Asia, 6.3% in the U.K. and 1.0% in Mexico and Latin America. The fund’s largest holdings include: Bank of Nova Scotia, EnCana, Royal Bank, Nexen, Potash Corp., Chevron, CVS Caremark, Manulife, TD Bank, Roche Holdings and BASF AG....

We still think high-quality mutual funds with a long-term focus will beat stock-market indexes over time. If funds invest as we advise — sticking with well-established companies and spreading their assets across the five main economic sectors — they will likely lose a lot less than the indexes during a significant market downturn. That’s because big market slides are particularly hard on the stocks that were the most popular during the preceding rise, and our approach avoids excessive investment in these companies. In contrast, index funds do tend to load up on the hottest, most popular stocks as they rise. That’s because these stocks make up a growing proportion of the index as they increase in value. The most recent example is Potash Corporation of Saskatchewan, which, propelled by soaring fertilizer prices, had the highest market capitalization on the Toronto exchange last June. The shares have since dropped 54%....

When we judge the investment quality of an individual company, we take nine key factors into account. These are: a record of profit; a record of dividends; an influential industry position; balance-sheet strength; geographical diversification; freedom from business cycles; freedom from excess regulation or insider abuse; ability to profit from lasting secular trends (such as global economic liberalization); and the ability to cash in on habitual customer behaviour. Mutual-fund ratings are more complex, since they are a step removed from these factors. Before we award our CWA Fund Ratings (Aggressive, Conservative or Income), we assess a fund’s strengths and weaknesses in several key areas. We start by looking at the quality of the fund’s holdings, based on our nine key factors. Then we look at the degree to which its holdings are spread out across the five main economic sectors: Manufacturing, Resources, Consumer, Finance and Utilities. Funds that focus on narrow segments are more risky or aggressive than those that diversify, even if they focus on a conservative area, such as Utilities....

RBC CANADIAN DIVIDEND FUND $37.65 (RBC Funds, P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9. 1-800-463-3863; Web site: www.royalbank.com. No load — deal directly with the bank) invests in well-established, dividend-paying companies. In fact, it invests solely in common stocks. That’s why, despite the fund’s name, we rate it Conservative rather than Income. The $7.1-billion RBC Canadian Dividend Fund’s top stock holdings are: Royal Bank of Canada, Bank of Nova Scotia, TD Bank, Manulife Financial, Brookfield Asset Management, EnCana, Bank of Montreal, TransCanada Corp. and Power Corp. RBC Canadian Dividend is a Conservative buy.

ISHARES CDN LARGECAP 60 INDEX FUND $15.54 (Toronto symbol XIU; buy or sell through a broker) (units split 4-for-1 in August 2008) 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 on the units are just 0.17% of assets. Most of the stocks in the index are high-quality companies. However, as it must ensure that all sectors are represented, the index holds a few we wouldn’t include, such as Biovail Corp. The index’s top holdings are: Royal Bank of Canada, 7.2%; EnCana Corporation, 5.2%; Research in Motion, 5.2%; TD Bank, 4.9%; Bank of Nova Scotia, 4.2%; Manulife Financial, 4.0%; Potash Corporation, 3.9%; Canadian Natural Resources, 3.7%; Suncor Energy, 3.7%; Barrick Gold, 3.7%; Goldcorp, 2.9%; Canadian National Railway, 2.8%; Bank of Montreal, 2.6%; and CIBC, 2.5%....

Brookfield Asset Management 4.75% Series 17 Preferreds, $14.85, symbol BAM.PR.M on Toronto, are perpetual preferred shares. That is, they have no fixed maturity date, and they have to pay their stated dividend forever, or “in perpetuity,” before they can pay common dividends in any given year. The shares began trading at $25 each in late 2006, and have fallen steadily since. In general, the prices of preferred shares are down lately, in spite of lower interest rates. There are a number of likely reasons for this: Preferred shares behave more like long-term, fixed-income instruments rather than short-term investments. While short-term interest rates are falling, the outlook for long-term rates is less certain....