Toronto-Dominion Bank

Exchange-traded funds (ETFs) give you a low-cost, flexible alternative to mutual funds. Here are five ETFs we recommend and one to sell.

ISHARES S&P/TSX 60 INDEX ETF $20.09 (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—the 60 largest, most heavily traded stocks on the exchange. Expenses are just 0.18% of assets, and it yields 2.9%. 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, 8.6%; TD Bank, 7.7%; Bank of Nova Scotia, 5.9%; CN Railway, 4.6%; Suncor Energy, 4.4%; Bank of Montreal, 3.9%; BCE, 3.8%; Enbridge, 3.6%; Canadian Natural Resources, 3.1%; CIBC, 3.0%; and Brookfield Asset Management, 2.8%....

ISHARES CANADIAN SELECT DIVIDEND INDEX ETF $21.88 (Toronto symbol XDV; buy or sell through brokers; ca.ishares.com) holds 30 of the highestyield 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%. iShares Canadian Select Dividend’s MER is higher than, say, the iShares S&P/TSX 60 Index ETF because it’s more actively managed. Most market indexes are set up so that the stocks in the index are those with the highest market capitalization and also the most widely traded. However, the iShares Canadian Select Dividend Index ETF aims to zero in on the 30 stocks that it sees as having the highest dividend yields—and yet also the best propects for dividend growth and sustainability. The fund’s top holdings are CIBC, 8.4%; Agrium, 7.4%; Bank of Montreal, 6.0%; Royal Bank, 5.8%; Bank of Nova Scotia, 5.0%; BCE, 4.5%; IGM Financial, 4.1%; Laurentian Bank of Canada, 4.1%; National Bank, 4.0%; TransCanada Corp., 4.0%; TD Bank, 3.5%; and Emera, 3.1%....

ISHARES MSCI CANADA INDEX FUND $24.16 (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 2.4%. The index’s top holdings are Royal Bank, 7.9%; TD Bank, 7.1%; Bank of Nova Scotia, 5.4%; CN Railway, 4.2%; Suncor Energy, 4.0%; Bank of Montreal, 3.6%; Enbridge, 3.3%; Canadian Natural Resources, 2.8%; and CIBC, 2.8%. 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....

These six ETFs hold mostly blue chip, widely traded stocks on Canadian and U.S. exchanges. All of them mirror, or track, the performance of major stock market indexes. That’s opposed to narrower indexes focused on, say, resources or themes such as solar power or biotech. Of course, you pay brokerage commissions to buy and sell these ETFs. But their low management fees give them a cost advantage over most mutual funds. Below we update our advice on all six—five buys and one we don’t recommend....

TD BANK $55.77 (Toronto symbol TD; Shares outstanding: 1.9 billion; Market cap: $103.5 billion; TSINetwork Rating: Above Average; Dividend yield: 3.9%; www.td.com) is the first Canadian bank to use Visa’s new tokenization technology in its mobile banking app. This system uses encrypted “tokens” instead of credit card numbers and other account information. That helps protect sensitive client information from online intruders. It also speeds up mobile payments and other transactions. Better security should encourage more of TD’s customers to do their banking online. That would cut its costs as electronic transactions are cheaper to process than those in physical branches....

TD BANK $55.77 (Toronto symbol TD; Shares outstanding: 1.9 billion; Market cap: $103.5 billion; TSINetwork Rating: Above Average; Dividend yield: 3.9%; www.td.com) is the first Canadian bank to use Visa’s new tokenization technology in its mobile banking app. This system uses encrypted “tokens” instead of credit card numbers and other account information. That helps protect sensitive client information from online intruders. It also speeds up mobile payments and other transactions. Better security should encourage more of TD’s customers to do their banking online. That would cut its costs as electronic transactions are cheaper to process than those in physical branches....

TORONTO-DOMINION BANK $55 (Toronto symbol TD; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.9 billion; Market cap: $104.5 billion; Price-to-sales ratio: 3.3; Dividend yield: 4.0%; TSINetwork Rating: Above Average; www.td.com) is the first Canadian bank to use Visa’s new tokenization technology in its mobile banking app. This system uses encrypted “tokens” instead of credit card numbers and other account information. This helps protect clients’ sensitive information from online intruders. It also speeds up mobile payments and other transactions. Better security should encourage more of TD’s customers to do their banking online. That would cut its costs, as electronic transactions are cheaper to process than those in physical branches....

TORONTO-DOMINION BANK $55 (Toronto symbol TD; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.9 billion; Market cap: $104.5 billion; Price-to-sales ratio: 3.3; Dividend yield: 4.0%; TSINetwork Rating: Above Average; www.td.com) is the first Canadian bank to use Visa’s new tokenization technology in its mobile banking app. This system uses encrypted “tokens” instead of credit card numbers and other account information. This helps protect clients’ sensitive information from online intruders. It also speeds up mobile payments and other transactions. Better security should encourage more of TD’s customers to do their banking online. That would cut its costs, as electronic transactions are cheaper to process than those in physical branches....

TORONTO-DOMINION BANK $55 (Toronto symbol TD; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.9 billion; Market cap: $104.5 billion; Price-to-sales ratio: 3.3; Dividend yield: 4.0%; TSINetwork Rating: Above Average; www.td.com) earned $2.4 billion, or $1.18 a share, in its fiscal 2016 first quarter, which ended January 31, 2016. That’s up 5.8% from $2.1 billion, or $1.12, a year earlier. Earnings for its Canadian banks (62% of the total) rose 4.4%, thanks to strong loan demand and gains from the wealthmanagement and insurance businesses. Earnings from U.S. banking (31%) jumped 20.2%. That’s largely because the low Canadian dollar enhanced its profits. However, earnings from wholesale banking (7%) fell 16.1%. Lower stock trading volumes offset higher advisory fees on mergers and acquisitions. Revenue rose 13.1%, to $8.6 billion from $7.6 billion. However, TD set aside $642 million to cover potential future loan losses, up 77.3% from $362 million. That’s mainly because it recently acquired the U.S. credit card portfolio of department store Nordstrom’s (New York symbol JWN). As well, low oil prices could hurt the ability of energy producers to repay their loans. These borrowers represent less than 1% of TD’s overall loan portfolio....