Toronto-Dominion Bank

Vanguard Canadian Short-Term Bond Index ETF, $24.96, symbol VSB on New York (Shares outstanding: 1.7 million; Market cap: $42.4 million; www.vanguard.com), mirrors the performance of the Barclays Global Aggregate Canadian Government/Credit 1-5 Year Float Adjusted Bond Index. This index consists of a wide range of investment-grade federal, provincial, municipal and corporate bonds with between one- and five-year terms to maturity. The fund holds 184 bonds with an average term to maturity of 3.0 years. The bonds in the index are 72.9% government and 27.1% corporate. The fund’s MER is 0.15%. The Vanguard Canadian Short-Term Bond Index ETF yields 2.8%. However, this high yield is due to the fact that some of the fund’s bonds pay above-market interest rates. But as a result they trade above their face value. When these bonds mature, holders will only get the bonds’ face value, which means the portfolio will incur predictable capital losses. These losses will offset some of the appeal of the above-market yields....

iShares S&P/TSX Capped Financials Index Fund, $22.71, symbol XFN on Toronto (Shares outstanding: 35.6 million; Market cap: $808.5 million; ca.ishares.com), aims to mirror the performance of the S&P/TSX Capped Financials Index, which is made up of the largest-capitalization financial-sector stocks on the Toronto exchange. The fund currently holds 25 stocks. The weight of any one company is capped at 25% of the index’s market capitalization, regardless of how big the stock is in relation to the index. The fund’s MER is 0.55%. It yields 3.5%. The iShares S&P/TSX Capped Financials Index Fund’s top holdings are Royal Bank at 20.5%; TD Bank, 18.7%; Bank of Nova Scotia, 15.6%; Bank of Montreal, 9.5%; CIBC, 7.8%; Manulife Financial, 5.5%; Sun Life Financial, 3.6%; National Bank, 3.1%; Power Corporation, 2.1%; and Intact Financial, 2.0%....

CANADIAN PACIFIC RAILWAY LTD., $91.80, Toronto symbol CP, rose 4% this week after it reported better-than-expected quarterly earnings. That’s because the company is starting to benefit from a major plan to improve its efficiency with new locomotives, upgraded tracks and software that optimizes train loads and speeds. In the three months ended September 30, 2012, CP’s earnings rose 19.8%, to $224 million, or $1.30 a share. That easily beat the consensus estimate of $1.23. A year earlier, the company earned $187 million, or $1.10 a share. Revenue rose 8.2%, to $1.45 billion from $1.34 billion. The company saw revenue gains from shipping automotive products (up 31.3%), consumer and industrial products (up 23.7%), coal (up 9.5%), intermodal (up 7.4%) and grain (up 2.1%). Revenue from fertilizer shipments fell 19.0%, while forest products revenue declined 3.9%....

Most stock markets have risen lately. But as always, they 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. ETF’s 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....

TORONTO-DOMINION BANK $81 (Toronto symbol TD; Conservative Growth Portfolio, Finance sector; Shares outstanding: 911.7 million; Market cap: $73.8 billion; Price-to-sales ratio: 2.5; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.td.com) earned $1.8 billion in the quarter ended July 31, 2012. That’s up 11.3% from $1.6 billion a year earlier. Earnings per share rose 9.1%, to $1.91 from $1.75, on more shares outstanding. Revenue rose 8.5%, to $5.8 billion from $5.4 billion.

Low interest rates continue to spur loan demand. As well, last year’s purchases of MBNA’s Canadian credit card operations and Chrysler Financial, which provides car loans to buyers of Chrysler vehicles, also contributed to the higher earnings.

The bank set aside $438 million to cover bad loans in the latest quarter, up 15.3% from $380 million. However, that’s mainly due to the extra loans from the MBNA purchase.

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TORONTO-DOMINION BANK $81 (Toronto symbol TD; Conservative Growth Portfolio, Finance sector; Shares outstanding: 911.7 million; Market cap: $73.8 billion; Price-to-sales ratio: 2.5; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.td.com) earned $1.8 billion in the quarter ended July 31, 2012. That’s up 11.3% from $1.6 billion a year earlier. Earnings per share rose 9.1%, to $1.91 from $1.75, on more shares outstanding. Revenue rose 8.5%, to $5.8 billion from $5.4 billion. Low interest rates continue to spur loan demand. As well, last year’s purchases of MBNA’s Canadian credit card operations and Chrysler Financial, which provides car loans to buyers of Chrysler vehicles, also contributed to the higher earnings. The bank set aside $438 million to cover bad loans in the latest quarter, up 15.3% from $380 million. However, that’s mainly due to the extra loans from the MBNA purchase....

Canadian Western Bank, $26.60, symbol CWB on Toronto (Shares outstanding: 78.2 million; Market cap: $2.1 billion; www.cwbank.com), offers business and personal banking services across the four western provinces. It’s the biggest Canadian bank headquartered in western Canada and the country’s eighth-largest. The bank’s wholly owned subsidiaries include National Leasing Group Inc., Canadian Western Trust Company, Valiant Trust Company, Canadian Direct Insurance Inc., Adroit Investment Management Ltd. and Canadian Western Financial Ltd. In the three months ended April 30, 2012, Canadian Western Bank’s earnings rose 7.4%, to $39.7 million from $36.9 million a year earlier. Earnings per share were unchanged at $0.52, on more shares outstanding. Net interest income rose 8.6%, to $105.1 million from $96.8 million. Other income fell 1.7%, to $20.3 million from $20.6 million....

TORONTO-DOMINION BANK $80 (Toronto symbol TD; Conservative Growth Portfolio, Finance sector; Shares outstanding: 908.2 million; Market cap: $72.7 billion; Price-to-sales ratio: 3.2; Dividend yield: 3.6%; TSINetwork Rating: Above Average; www.td.com) is Canada’s second-largest bank, with total assets of $773.2 billion.

TD is also cutting its exposure to troubled European countries. It held $691 million of investments from these nations on April 30, 2012, down from $1.0 billion on October 31, 2011.

The bank earned $1.7 billion in its second quarter, up 13.9% from $1.5 billion a year earlier. Earnings per share rose 11.7%, to $1.82 from $1.63, on more shares outstanding. These gains are largely the result of TD’s recent $6.8-billion purchase of MBNA’s Canadian credit card business. Revenue rose 11.5%, to $5.8 billion from $5.2 billion.

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CANADIAN PACIFIC RAILWAY LTD., $75.49, Toronto symbol CP, has formed a partnership with Smart Sand Inc., a private company that sells sand to oil and gas producers. These clients pump this sand, along with water and other chemicals, into shale rock formations. This fractures the rock and releases the oil and gas. Under the deal, CP and Smart Sand will build a new facility in North Dakota that will load the sand onto CP’s trains. From there, CP will deliver the sand to Smart Sand’s customers in the Williston Basin, which covers parts of North and South Dakota, Montana and Saskatchewan. CP did not say how much this new facility would cost, but it should begin operating in early 2013....

The sovereign debt problems in Europe, particularly among the so-called PIIGS countries (Portugal, Italy, Ireland, Greece and Spain), have held back the shares of Canada’s big five banks in the past few months. However, their exposure to these troubled countries remains small in relation to their earnings and market caps. Every investor should aim to hold at least two of Canada’s big banks. For new buying, Bank of Nova Scotia (see next page) remains our favourite. 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: 2.7; Dividend yield: 4.3%; TSINetwork Rating: Above Average; www.rbc.com) is Canada’s largest bank, with $800.4 billion of assets....