Toronto-Dominion Bank

ISHARES S&P/TSX 60 INDEX FUND $21.54 (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....

Exchange traded funds (ETFs) are set up to mirror the performance of a stock market index or sub-index. 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....

TIM HORTONS INC., $87.40, Toronto symbol THI, jumped 27% this week after agreeing to a friendly takeover offer from Miami-based Burger King Worldwide (New York symbol BKW). The combined firm would be the world’s third-largest fast-food operator, after McDonald’s and Yum Brands, with annual sales of $23 billion U.S. and 18,000 restaurants in over 100 countries. Canada will supply 67% of the merged company’s revenue, followed by the U.S. (20%) and other countries (13%). The Tim Hortons and Burger King chains will operate independently but will probably share some back office and distribution networks. Tim Hortons can also use Burger King’s expertise to expand in the U.S. and other countries....

ISHARES S&P/TSX 60 INDEX FUND $21.94 (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 0.17% of assets.

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, 8.1%; TD Bank, 7.4%; Bank of Nova Scotia, 6.4%; Suncor Energy, 4.8%; CN Railway, 4.2%; Canadian Natural Resources, 3.9%; Bank of Montreal, 3.7%; Enbridge, 3.1%; Valeant Pharmaceuticals, 3.0%; Manulife Financial, 2.9%; CIBC, 2.8%; BCE, 2.7%; TransCanada Corp., 2.6%; Potash Corp., 2.5%; CP Rail, 2.2%; and Cenovus, 1.9%.

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TORONTO-DOMINION BANK $56 (Toronto symbol TD; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.8 billion; Market cap: $99.0 billion; Price-to-sales ratio: 3.0; Dividend yield: 3.4%; TSINetwork Rating: Above Average; www.td.com) is Canada’s largest bank, with $896.5 billion of assets.

On January 1, 2014, the bank became the primary credit card issuer for the hugely popular Aeroplan travel reward program run by Aimia Inc. (Toronto symbol AIM). As part of the deal, TD acquired half of the existing Aeroplan accounts from the previous issuer, CIBC (see page 75). It paid $162.5 million upfront and will pay $37.5 million annually over the next three years.

Thanks to this purchase, as well as steady loan demand in Canada and the U.S., TD’s earnings rose 13.5% in the quarter ended April 30, 2014, to $2.1 billion from $1.8 billion a year earlier. Per-share earnings gained 14.7%, to $1.09 from $0.95, on fewer shares outstanding. Revenue rose 12.5%, to $7.4 billion from $6.6 billion.

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The U.S. Federal Reserve has indicated that it will probably end its bond-purchasing program, known as quantitative easing, as early as October 2014. After that, the Fed may raise interest rates, particularly if inflation becomes a problem. Higher interest rates in the U.S. would likely push up rates in Canada and elsewhere, slowing demand for mortgages and car loans. However, Canada’s big banks continue to expand into feebased services, like wealth management, which are less sensitive to interest rates. We continue to like all five banks, but we prefer TD and Bank of Nova Scotia for new buying....

Exchange traded funds (ETFs) are set up to mirror the performance of a stock market index or sub-index. 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, $53.39, Toronto symbol TD, reported better-than-expected quarterly earnings this week, thanks to steady loan demand in Canada and the U.S. It’s also profiting from its recent deal with Aimia (Toronto symbol AIM) to become the main credit card issuer for the popular Aeroplan travel-reward program. In the quarter ended April 30, 2014, TD’s earnings rose 13.5%, to $2.1 billion from $1.8 billion a year earlier. Due to fewer shares outstanding, per-share earnings gained 14.7%, to $1.09 from $0.95. These figures exclude unusual items, such as costs related to the new Aeroplan card business. On that basis, the latest earnings beat the consensus estimate of $1.02 a share. Revenue rose 12.5%, to $7.4 billion from $6.6 billion. In addition to the new Aeroplan deal, TD is benefiting from last year’s purchase of retailer Target Corp.’s U.S. credit card portfolio. As well, higher debt-underwriting volumes and merger and acquisition fees pushed up revenue at TD’s wholesale banking division by 5.4%....

AIMIA INC, $19.15, symbol AIM on Toronto, owns and operates Aeroplan, Canada’s largest loyalty program, with over 4.8 million members who collect Aeroplan miles from participating companies. Members can exchange miles for flights, car rentals, hotel rooms and merchandise. The company also owns Nectar, the U.K.’s biggest loyalty program. In addition, it has interests in Air Miles Middle East and Nectar Italia, as well as Club Premier, the leading loyalty program in Mexico. On January 1, 2014, TD Bank replaced CIBC as the main credit card issuer for Aeroplan. Under a new 10-year deal, TD is now launching new cards under the Aeroplan banner, including cards for frequent flyers and small businesses. The deal also let CIBC hang on to Aeroplan accounts held by customers who also bank at CIBC. That was about half the Aeroplan portfolio....

AIMIA INC. $17.56 (Toronto symbol AIM; TSINetwork Rating: Extra Risk) (514-205-7315; www.aimia.com; Shares outstanding: 173.0 million; Market cap: $3.0 billion; Dividend yield: 3.9%) owns and operates Aeroplan, Canada’s largest loyalty program, with over 4.6 million members who collect Aeroplan miles from participating companies....