toronto-dominion bank

AIMIA INC., $15.74, symbol AIM on Toronto, rose over 13% this week after TD Bank agreed to become the primary credit card issuer for Aeroplan, Aimia’s main loyalty program. TD is a recommendation of The Successful Investor, our newsletter that focuses on conservative Canadian investing. Aeroplan is Canada’s largest loyalty program, with over 4.6 million members who collect Aeroplan miles from participating companies. Members can exchange their miles for flights, car rentals, hotel rooms and merchandise. Under this new 10-year deal, which would begin January 1, 2014, TD will launch new credit cards under the Aeroplan banner, including cards for frequent flyers and small businesses....

TORONTO-DOMINION BANK $81 (Toronto symbol TD; Conservative Growth Portfolio, Finance sector; Shares outstanding: 922.1 million; Market cap: $74.7 billion; Price-to-sales ratio: 2.4; Dividend yield: 4.0%; TSINetwork Rating: Above Average; www.td.com) is Canada’s second-largest bank, with $826.4 billion of assets.

In the three months ended April 30, 2013, TD’s earnings rose 5.8%, to $1.8 billion from $1.7 billion a year earlier. Because of more shares outstanding, earnings per share rose 4.4%, to $1.90 from $1.82.

Revenue increased 4.3%, to $6.0 billion from $5.75 billion. Revenue at TD’s Canadian retail banking division (which supplies 44% of the bank’s overall revenue) rose 1.5%, as its credit card holders spent more and demand rises for home mortgages and car loans.

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Bank of Nova Scotia (see page 61) is our favourite bank, but we still like the outlook for Canada’s other top banks. All four are using their strong balance sheets to buy up assets that diversify their businesses, often at bargain prices.

ROYAL BANK OF CANADA $59 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.4 billion; Market cap: $82.6 billion; Price-to-sales ratio: 2.3; Dividend yield: 4.3%; TSINetwork Rating: Above Average; www.rbc.com) is Canada’s largest bank, with $867.5 billion of assets.

Royal recently paid $3.7 billion for Ally Financial’s Canadian operations....

ISHARES DOW JONES CANADA SELECT DIVIDEND INDEX FUND $22.02 (Toronto symbol XDV; buy or sell through brokers; 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 its assets. The fund’s MER is 0.50%. It yields 4.3%.

The fund’s top holdings are CIBC, 6.5%; Bonterra Energy, 6.4%; National Bank, 5.8%; TD Bank, 5.5%; Bank of Montreal, 5.3%; Telus Corp., 4.9%; BCE Inc., 4.4%; Royal Bank, 4.4%; Bank of Nova Scotia, 4.1%; and IGM Financial, 4.1%.

The fund holds 51.4% of its assets in financial stocks. 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.
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ISHARES S&P/TSX 60 INDEX FUND $17.66 (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, 7.8%; TD Bank, 6.7%; Bank of Nova Scotia, 6.0%; Suncor Energy, 4.6%; Bank of Montreal, 3.6%; CN Railway, 3.6%; Potash Corp., 3.3%; Enbridge, 3.1%; Trans- Canada Corp., 3.0%; BCE, 3.0%; CIBC, 2.9%; Canadian Natural Resources, 2.9%; Barrick Gold, 2.9%; Goldcorp, 2.6%; Manulife Financial, 2.3%; Cenovus Energy, 2.2%; and Telus, 1.9%.
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MANITOBA TELECOM SERVICES INC., $33.93, Toronto symbol MBT, rose 6% today after it agreed to sell its Allstream subsidiary to Accelero Capital Holdings, a private firm controlled by Egyptian billionaire Naguib Sawiris. In 2004, the company paid $1.6 billion for Allstream, which provides integrated telephone, Internet and other communication services to over 50,000 businesses across Canada. The sale price is $520 million, which is equal to 23% of Manitoba Telecom’s $2.3-billion market cap. If you disregard various closing costs, Manitoba Telecom will receive $405 million. Assuming regulators approve, the company expects to complete the sale in the second half of 2013....

Most U.S. markets have risen lately, while Canada’s resource-heavy Toronto Stock Exchange has lagged. But as always, both remain subject to unexpected downturns. One way to profit from rising markets is to add exchange traded funds (ETFs) that track major stock indexes to your portfolio. ETFs trade on stock exchanges, just like stocks. Prices are quoted in newspaper stock tables and online. You must pay brokerage commissions to buy and sell ETFs, but their low management fees still give them a cost advantage over most mutual funds....

Most U.S. markets have risen lately, while Canada’s resource-heavy Toronto Stock Exchange has lagged. But as always, both remain subject to unexpected downturns. Even so, the long-term outlook is for higher stock prices.

One way to profit from rising markets is to add exchange traded funds (ETFs) that track major stock indexes to your portfolio.

ETFs trade on stock exchanges, just like stocks....

BANK OF MONTREAL, $64.08, Toronto symbol BMO, reported better-than-expected earnings this week. That’s mainly because stronger results from securities trading and wealth management offset lower earnings from its retail-banking business. In the first quarter of the bank’s 2013 fiscal year, which ended January 31, 2013, its earnings rose 7.1%, to $1.04 billion, or $1.52 a share. These figures exclude unusual items, such as costs to integrate U.S. banking firm Marshall & Ilsley, which Bank of Montreal bought in July 2011. On that basis, the latest earnings beat the consensus estimate of $1.48 a share. A year earlier, Bank of Montreal earned $972 million, or $1.42 a share. Overall revenue fell 0.9%, to $4.08 billion from $4.12 billion. Revenue was unchanged at the Canadian banking business, which supplies 39% of the bank’s overall revenue. Low interest rates continue to attract borrowers, but they also hurt the income that Bank of Montreal earns on its loans. Revenue at its U.S. operations (19% of the total) fell 4.4%, partly due to smaller gains on sales of securities....

ISHARES DOW JONES CANADA SELECT DIVIDEND INDEX FUND $22.24 (Toronto symbol XDV; buy or sell through brokers; 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 its assets. The fund’s MER is 0.50%. It yields 4.2%.

The fund’s top holdings are CIBC, 6.7%; Bonterra Energy, 6.0%; National Bank, 6.0%; TD Bank, 5.5%; Bank of Montreal, 5.4%; Royal Bank, 4.4%; Telus Corp., 4.4%; Bank of Nova Scotia, 4.1%; BCE Inc., 4.1%; and IGM Financial, 3.9%.

The fund holds 51.5% of its assets in financial stocks. 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.

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