Toronto-Dominion Bank

TORONTO-DOMINION BANK, $83.60, Toronto symbol TD, is the first of Canada’s big five banks to raise its dividend following the 2008-2009 financial crisis. The new quarterly dividend of $0.66 a share, up 8.2% from $0.61, yields 3.2% on an annualized basis. TD also reported better-than-expected quarterly earnings this week. In the three months ended January 31, 2011, the bank’s earnings rose 11.0%, to $1.6 billion from $1.4 billion a year earlier. Earnings per share rose 8.8%, to $1.74 from $1.60, on more shares outstanding. These figures exclude several one-time items, such as gains and losses on securities the bank holds, and costs to integrate recent acquisitions in the U.S. On that basis, the latest earnings easily beat the consensus earnings estimate of $1.54 a share. More of the bank’s customers are repaying their loans on time. As a result, TD’s loan-loss provisions fell 19.9%, to $414 million from $517 million. That was the main reason for the higher earnings....

Exchange-traded funds (ETFs) may have a place in your portfolio. That’s because, unlike many other financial innovations, they don’t load you up with heavy management fees, or tie you down with high redemption charges if you decide to get out of them. Instead, they give you a low-cost, flexible, convenient alternative to mutual funds. ETFs trade on stock exchanges, just like stocks. Prices are quoted in newspaper stock tables and online. You’ll have to pay brokerage commissions to buy and sell ETFs. However, ETFs’ low management fees still give them a cost advantage over most conventional mutual funds. As well, shares are only added or removed when the underlying index changes. As a result of this low turnover, you won’t incur the regular capital-gains bills generated by the yearly distributions most conventional mutual funds pay out to unitholders....

PLEASE NOTE: Next week, Wall Street Stock Forecaster, our newsletter that focuses on the U.S. stock markets, will reveal its #1 pick for 2011. If you’re not already a Wall Street Stock Forecaster subscriber, click here to learn how you can get one month — including the Wall Street Stock Forecaster Stock of the Year —FREE. ENCANA CORP., $32.00, Toronto symbol ECA, is selling its natural-gas processing plant in Colorado, as well as five pipelines that pump gas into this plant. Encana will receive $303 million when the sale closes by March 31, 2011 (all amounts except share price in U.S. dollars). To put this figure in context, the company earned $98 million, or $0.13 a share, in the three months ended September 30, 2010. The company did not say what it plans to do with the cash....

TORONTO-DOMINION BANK $74 (Toronto symbol TD; Conservative Growth Portfolio, Finance sector; Shares outstanding: 878.5 million; Market cap: $65.0 billion; Price-to-sales ratio: 2.6; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www.td.com) is Canada’s second-largest bank, with total assets of $619.5 billion. TD recently agreed to buy privately held Chrysler Financial, which provides car loans and leases to buyers of Chrysler vehicles in Canada and the U.S. The purchase will make TD one of the top five car-loan providers in North America. The bank will pay $6.3 billion U.S. for Chrysler Financial when the deal closes in April 2011. This purchase will let TD profit from rising new-car demand. It will also add $100 million to TD’s annual earnings, starting in fiscal 2012....

Canada’s big five banks have posted strong results since the 2007-2009 financial crisis. All five should have no trouble complying with new international regulations aimed at avoiding another crisis. As well, their strength is helping them buy other financial companies in the U.S. and other countries, often at bargain prices. 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: 2.1; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.rbc.com) is Canada’s largest bank, with total assets of $726.2 billion. In its 2010 fiscal year, which ended October 31, 2010, Royal earned $5.2 billion, or $3.46 a share. That’s up 35.4% from $3.9 billion, or $2.57 a share, in fiscal 2009....

TORONTO-DOMINION BANK, $72.23, Toronto symbol TD, fell 4% this week, even though the bank reported higher revenue and earnings in its 2010 fiscal year, which ended October 31, 2010. Revenue rose 9.6%, to $19.6 billion from $17.9 billion in fiscal 2009. Earnings rose 10.9%, to $5.2 billion from $4.7 billion. Earnings per share rose 7.9%, to $5.77 from $5.35, on more shares outstanding. These figures exclude unusual items, such as costs to integrate the recently purchased South Financial Group, Inc., which operates bank branches in Florida and the Carolinas. On this basis, the latest earnings fell short of the consensus estimate of $5.81 a share. The bank continues to set aside less money to cover bad loans. That’s the main reason why earnings at TD’s retail-banking business rose 53.7% in the U.S. and 25.2% in Canada. Earnings from wealth management rose 7.4%. However, earnings from TD’s trading business fell 23.8%, due to lower trading volumes, a drop in underwriting activity, and fewer gains from its investment portfolio....

ISHARES MSCI CANADA INDEX FUND $29.28 (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 0.55%. The index’s top holdings are Royal Bank, 6.5%; TD Bank, 5.5%; Bank of Nova Scotia, 4.8%; Suncor Energy, 4.4%; Barrick Gold, 4.0%; Potash Corp., 3.7%; Canadian Natural Resources, 3.3%; Bank of Montreal, 2.8%; Goldcorp, 2.8%; CN Railway, 2.6%; CIBC, 2.5% and TransCanada Corp., 2.2%. If you want to own a Canadian index fund, you should buy the iShares S&P/TSX 60 Index Fund (see previous page). You’ll pay about a third of the management fees....

ISHARES DOW JONES CANADA SELECT DIVIDEND INDEX FUND $20.26 (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 5.3%. The fund’s top holdings are CIBC, 8.0%; Bank of Montreal, 6.4%; National Bank, 5.7%; TD Bank, 5.6%; Telus, 5.2%; Bank of Nova Scotia, 4.6%; Manitoba Telecom, 4.5%; IGM Financial, 4.2%; Royal Bank, 4.0%; Enbridge, 3.5%, TMX Group, 3.5%; and TransCanada Corp., 3.3%. The fund holds 60.1% of its assets in financial stocks. Utilities are next, at 23.0%. 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 S&P/TSX 60 INDEX FUND $18.24 (Toronto symbol XIU; buy or sell through a broker; ca.ishares.com) (units split 4-for-1 in August 2008) is a good, low-fee way to buy the top stocks and income trusts 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 Pages Income Fund. The index’s top holdings are: Royal Bank, 7.2%; TD Bank, 5.9%; Bank of Nova Scotia, 5.2%; Suncor Energy, 4.7%; Barrick Gold, 4.5%; Potash Corp., 4.0%; Canadian Natural Resources, 3.7%; Bank of Montreal, 3.1%; Goldcorp, 3.1%; CN Railway, 2.8%; CIBC, 2.8%; Research in Motion, 2.5%; and Trans- Canada Corp., 2.4%....

Exchange-traded funds (ETFs) may have a place in your portfolio. That’s because, unlike many other financial innovations, they don’t load you up with heavy management fees, or tie you down with high redemption charges if you decide to get out of them. Instead, they give you a low-cost, flexible, convenient alternative to mutual funds. ETFs trade on stock exchanges, just like stocks. Prices are quoted in newspaper stock tables and online. You’ll have to pay brokerage commissions to buy and sell ETFs. However, ETFs’ low management fees still give them a cost advantage over most conventional mutual funds. As well, shares are only added or removed when the underlying index changes. As a result of this low turnover, you won’t incur the regular capital-gains bills generated by the yearly distributions most conventional mutual funds pay out to unitholders....