Telus Corp.

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. Below, we update our advice on six ETFs — five buys and one we don’t recommend....

TELUS CORP. (Toronto symbols T $53 and T.A $51; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 352.9 million; Market cap: $18.7 billion; Price-to-sales ratio: 1.7; Dividend yield: 4.2%; TSINetwork Rating: Above Average; www.telus.com) continues to expand its wireless business. As a result, it now gets 52% of its earnings from its 7.1 million wireless subscribers across Canada. The company gets the remaining 48% of its earnings from its traditional phone business, which has 3.7 million customers in B.C., Alberta and eastern Quebec. Telus also has 1.2 million Internet subscribers. The company continues to profit from rising demand for smartphones and wireless data. Smartphones now account for 42% of its wireless users under long-term contracts, up from 25% a year earlier....

BCE, Telus and Manitoba Telecom are facing rising competition from cable companies, as well as new entrants in the wireless market. However, all three companies have spent heavily on their wireless and high-speed Internet networks in the past few years. That’s letting them launch new services, like Internet-based TV. The extra cash flows from these services should let all three firms raise their already high dividends. BCE INC. $39 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 777.5 million; Market cap: $30.3 billion; Price-to-sales ratio: 1.6; Dividend yield: 5.3%; TSINetwork Rating: Above Average; www.bce.ca) is Canada’s largest provider of telephone, Internet and wireless services. The company’s main subsidiary, Bell Canada, has 6.3 million residential and business customers in Ontario and Quebec....

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One of our favourite Canadian dividend stocks continues to boost its payout

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ISHARES DOW JONES CANADA SELECT DIVIDEND INDEX FUND $21.64 (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 2.7%. The fund’s top holdings are CIBC, 6.4%; Bonterra Energy Corp., 6.0%; National Bank, 5.2%; Bank of Montreal, 5.2%; TD Bank, 5.1%; Telus, 4.6%; IGM Financial, 4.5%; AG Growth International, 4.2%; Royal Bank, 3.9%; Bank of Nova Scotia, 3.8%; BCE, 3.7%; and TMX Group, 3.6%. The fund holds 51.8% of its assets in financial stocks. Utilities are next, at 24.0%. 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....

TELUS CORP. $51.88 (Toronto symbol T.A; Shares outstanding: 335.6 million; Market cap: $17.4 billion; TSINetwork Rating: Above Average; Dividend yield: 4.2%; www.telus.com) continues to benefit from its heavy investments in its wireless networks. Thanks to its rising wireless revenue, Telus has tripled its dividend since 2003. The dividend paying stock now plans to raise its payout twice a year to 2013, and increase the rate by 10% a year. In the three months ended March 31, 2011, Telus’ earnings per share rose 18.8%, to $1.01 from $0.85. Revenue rose 6.5%, to $2.5 billion from $2.4 billion....

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....

Claymore Investments, Inc., is the wholly owned Canadian subsidiary of Chicago-based Guggenheim Partners. The Canadian branch now offers 29 exchange-traded funds (ETFs) that trade on the Toronto exchange. All of the funds aim to combine what Claymore sees as the advantages of passive investment in an index, along with active management to eliminate stocks from the index that it expects to perform poorly. The funds use a variety of mathematically formulated models, or quantitative investment methodologies. The managers see this as a systematic approach to equity selection, portfolio monitoring and portfolio management....

MANITOBA TELECOM SERVICES INC. $34.01 (Toronto symbol MBT; Shares outstanding: 64.7 million; Market cap: $2.3 billion; TSINetwork Rating: Average; Dividend yield: 5.0%; www.mts.ca) gets 53% of its revenue from its MTS division, which mainly sells traditional and wireless telephone services to consumers in Manitoba. The remaining 47% comes from its Allstream division, which sells communication services to businesses across Canada. In the three months ended March 31, 2011, Manitoba Telecom’s revenue fell slightly, to $439.3 million from $442 million a year earlier. The MTS division’s revenue rose 3%. Allstream’s revenue fell 4.5%, mostly because it is closing less-profitable businesses. Earnings per share jumped 59.5%, to $0.67 from $0.42. The gains came from cost-saving measures, including layoffs. More important, its restructured Allstream division is showing improved results....

Manitoba Telecom’s annual dividend took a big jump in 2004, from $1 share to $2.60, mostly due to investor pressure at a time when many companies were converting to high-yield income trusts. Dividends remained steady until August 2010. That’s when the company cut its annual payout by 34.6%, to $1.70 a share, to free up cash for network upgrades. Now, Manitoba Tel has the funds to continue to invest for growth, and still pay $1.70 a share for a high 5.0% yield. MANITOBA TELECOM SERVICES INC. $34.01 (Toronto symbol MBT; Shares outstanding: 64.7 million; Market cap: $2.3 billion; TSINetwork Rating: Average; Dividend yield: 5.0%; www.mts.ca) gets 53% of its revenue from its MTS division, which mainly sells traditional and wireless telephone services to consumers in Manitoba. The remaining 47% comes from its Allstream division, which sells communication services to businesses across Canada. In the three months ended March 31, 2011, Manitoba Telecom’s revenue fell slightly, to $439.3 million from $442 million a year earlier. The MTS division’s revenue rose 3%. Allstream’s revenue fell 4.5%, mostly because it is closing less-profitable businesses....