Toronto-Dominion Bank

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a beginning or experienced investor, these weekly updates are designed to give you specific advice on how to spot the top stock picks. Each Investor Toolkit update gives you a fundamental piece of investing strategy, and shows you how you can put it into practice right away. Today’s tip: “How you can profit from our TSI Network ratings: Part 2” In last week’s Investor Toolkit, we analyzed 4 of the 9 factors we use to assign one of our TSI Network ratings (Highest Quality, Above Average, Average, Extra Risk, Speculative and Start-up) to every stock we recommend in our newsletters, including our flagship publication, The Successful Investor. Click here to read that article....

We’ve long recommended that all Canadian investors own shares of two or more of the big-five Canadian banks. That’s mainly because of the banks’ importance to Canada’s economy. However, each of the big five banks have different objectives, so they’re not all suitable for every investor.

Dividend paying stocks: Scotia is Canada’s most international bank

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BANK OF NOVA SCOTIA $58.14, Toronto symbol BNS, has joined a new consortium called Maple Group Acquisition Corp. Other members include CIBC, TD Bank, National Bank and five major pension funds. Maple wants to buy a controlling interest in TMX GROUP $45, Toronto symbol X, which operates the Toronto Stock Exchange. TMX has already accepted a takeover offer from the London Stock Exchange. (Note that Royal Bank and Bank of Montreal are advising on that potential merger. That’s why they are not part of Maple.)...

BANK OF MONTREAL, $61.82, Toronto symbol BMO, continues to benefit as more borrowers pay back their loans on time. However, demand for new loans is slowing, and its credit-card customers are making fewer purchases. As well, other banks are paying higher interest rates to attract depositors. That is forcing Bank of Montreal to raise its rates in response. Even so, Bank of Montreal’s revenue rose 5.5%, in its 2011 second quarter, which ended April 30, 2011, to $3.2 billion from $3.05 billion a year earlier. Earnings rose 7.5%, to $800 million from $745 million a year earlier. Earnings per share rose 6.3%, to $1.34 from $1.26, on more shares outstanding. Without unusual items, such as costs related to its upcoming $4.1-billion, all-stock purchase of U.S.-based banking firm Marshall & Ilsley Corp. (New York symbol MI), earnings per share would have risen 5.5%, to $1.35 from $1.28. On that basis, the latest earnings beat the consensus estimate of $1.31 a share. Bank of Montreal expects to complete the Marshall & Ilsley purchase by July 31, 2011....

TORONTO-DOMINION BANK $82 (Toronto symbol TD; Conservative Growth Portfolio, Finance sector; Shares outstanding: 883.1 million; Market cap: $72.4 billion; Price-to-sales ratio: 2.8; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.td.com) has agreed to sell its 13.46% stake in Maple Leaf Sports & Entertainment (MLSE) to the Ontario Teachers’ Pension Plan. MLSE owns professional sports teams (Toronto Maple Leafs, Toronto Raptors and Toronto FC) plus the Air Canada Centre arena in downtown Toronto. The bank did not disclose the price, but it likely made a substantial return on this investment. TD Bank is a buy.

iShares S&P/TSX Capped Financials Index Fund, $24.56, symbol XFN on Toronto (Shares outstanding: 42.4 million; Market cap: $1.0 billion; 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 26 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 5.0%. The fund’s top holdings are Royal Bank of Canada at 20.5%; TD Bank, 17.3%; Bank of Nova Scotia, 14.9%; Bank of Montreal, 8.5%; CIBC, 7.7%; Manulife Financial, 7.3%; Sun Life Financial, 4.13%; National Bank, 3.1%; Power Corporation, 2.3% and Fairfax Financial Holdings, 1.8%....

Dividend 15 Split Corp., $12.30, symbol DFN on Toronto (Shares outstanding: 13.6 million; Market cap: $167.3 million; www.dividend15.com), is a split-share investment corporation that holds shares of 15 companies: BCE Inc., CI Financial Corporation, Bank of Nova Scotia, Thomson Reuters, National Bank of Canada, TransAlta Corporation, Sun Life Financial, Canadian Imperial Bank of Commerce, TransCanada Corporation, Manulife Financial, TD Bank, Royal Bank of Canada, Bank of Montreal, Telus Corporation and Enbridge. The company can also invest up to 15% of its portfolio in other stocks. Dividend 15 Split Corp. has two share classes: Dividend 15 Split Corp. capital shares (Toronto symbol DFN), and Dividend 15 Split Corp. preferred shares (Toronto symbol DFN.PR.A)....

ISHARES S&P/TSX 60 INDEX FUND $20.44 (Toronto symbol XIU; buy or sell through a broker; 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. Most of the stocks in the index are high-quality companies. However, as it must ensure that all sectors are represented, it holds a few we wouldn’t include, such as Yellow Media Inc. The index’s top holdings are: Royal Bank, 6.7%; Suncor Energy, 5.9%; TD Bank, 5.8%; Bank of Nova Scotia, 5.3%; Canadian Natural Resources, 4.4%; Barrick Gold, 4.3%; Potash Corp., 4.2%; Goldcorp, 3.1%; Bank of Montreal, 2.9%; CN Railway, 2.7%; Manulife Financial, 2.7%; CIBC, 2.7%; Research in Motion, 2.5%; and Cenovus Energy, 2.3%....

ISHARES DOW JONES CANADA SELECT DIVIDEND INDEX FUND $21.65 (Toronto symbol XDV; buy or sell through a broker; 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 assets. The fund’s MER is 0.50%. It yields 1.9%. The fund’s top holdings are CIBC, 6.9%; Bonterra Energy Corp., 6.3%; Bank of Montreal, 5.2%; National Bank, 5.0%; TD Bank, 5.0%; AG Growth International, 4.9%; IGM Financial, 4.2%; Telus, 4.1%; Royal Bank, 4.0%; Bank of Nova Scotia, 3.9%; BCE, 3.5%; and TMX Group, 3.4%. The fund holds 52.9% of its assets in financial stocks. Utilities are next, at 22.5%. 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....

ISHARES MSCI CANADA INDEX FUND $33.63 (New York symbol EWC; buy or sell through brokers; ca.ishares.com) is like a market-cap-based index fund, but its managers try to improve performance by tinkering with the index-fund formula. They do this through their Morgan Stanley Capital International Canada Index. The fund has an MER of 0.50%. The index’s top holdings are Royal Bank, 5.8%; TD Bank, 5.0%; Suncor Energy, 5.0%; Bank of Nova Scotia, 4.4%; Potash Corp., 4.0%; Canadian Natural Resources, 3.7%; Barrick Gold, 3.6%; Teck Resources, 2.7%; Bank of Montreal, 2.5%; Goldcorp, 2.4%; CN Railway, 2.4%; Manulife Financial, 2.4%; CIBC, 2.3% and Research in Motion, 2.2%. If you want to own a Canadian index fund, you should buy the iShares S&P/TSX 60 Index Fund. You’ll pay about a third of the management fees....