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Canadian Income Investing Opportunities

Saturday, July 24th, 2010

The United States is given the most attention due to the dominating influence it has in the world capital markets, but what about Canada, it’s neighbor to the north? Surely Canadian stocks, bonds and other instruments can offer value to investors looking for income investments.

The Canadian stock and bond markets offer many advantages over the United States at the moment. The Canadian banking system is stronger and more fiscally conservative than U.S. banks. In addition, the Canadian government has been moving in a conservative, business-oriented direction for several years, which makes Canadian capital markets a great opportunity for investors to flee the turmoil in the American capital markets.

In terms of specific instruments, aside from bonds there are some great dividend-paying stocks available for purchase. In particular, the stock of the Bank of Nova Scotia has been looking very attractive for some time. The Bank of Nova Scotia’s investment banking arm, Scotia Bank, was ranked as the number one investment bank in the world in the infrastructure sector by Global Finance magazine.

The Toronto Stock Exchange, which goes by the initials TSX, is the third largest exchange in North America and the eighth largest in the world in terms of total market capitalization. The exchange lists companies in Canada, the United States and even in some European countries. Notably, the exchange represents several Canadian energy companies, such as Canadian Oil Sands Trust. Most importantly, the exchange represents all of Canada’s Big Five banks, which makes it the central hub for banking stocks in the country.

Canadian bonds and other fixed-income securities come in many varieties for every flavor of investor. The bond market offers exposure to corporate debt in a financial system hailed as the soundest in the world for two years running by the World Economic Forum, based in Geneva, Switzerland. Next to government debt, which is sold through the Bank of Canada as well as other large banks such as the Royal Bank of Canada and the Bank of Nova Scotia, provincial and municipal debt represents the second-largest sector of the Canadian bond market. Recently, investors seeking to flee an impending sovereign debt crisis in Europe have come to Canadian bonds in droves.