(In the current issue of Canadian Wealth Advisor, our newsletter for the conservative investor, we update our buy/sell/hold advice on a well-established company that has risen over 36% for us in the past year — and could go even higher. Read on for further details.)

That’s not to say that there won’t be surprises that affect every company in a particular industry. But well-established, safety-conscious stocks have the asset size and the financial clout — including solid balance sheets and strong cash flow — to weather market downturns or changing industry conditions. That makes them good picks for a conservative investor.

Telus: A conservative investor-friendly stock that faces rising competition

In the current issue of Canadian Wealth Advisor, we update our buy/sell/hold advice on Consumer stock Telus Corp. (symbol T.A on Toronto).

Telus is a good example of a well-established company that would be suitable for a conservative investor. Right now, it is facing rising competition in the most profitable parts of its business, including wireless. Even so, the company is thriving by upgrading its network, offering bundles of local phone, television and wireless services, expanding its retail-store network and more.

You want to protect your "safe money" -- the part of your portfolio you're counting on for the future -- yet you want to earn more than you're getting from the bank. That's where my Canadian Wealth Advisor newsletter comes in. I'll show you several proven ways to protect and grow your safe money. Click here to learn how you can get started right away.

Telus provides telephone services in B.C., Alberta and eastern Quebec. It also sells wireless services across Canada.

Telus’s established — and growing — network gives it an edge

The company’s newest competitors include three companies that recently entered the wireless market: Wind Mobile, Mobilicity and Public Mobile. As well, Shaw Communications Inc. plans to launch a wireless service in western Canada in 2011.

However, Telus is spending $1.6 billion to upgrade its networks to handle a wider variety of cellphones, including Apple’s hugely popular iPhone smartphone. That should help it attract and hold onto clients.

In contrast, two of its new competitors, Wind Mobile and Public Mobile, have had problems launching their networks. For example, several parts of Public Mobile’s Montreal network are currently out of service. That has forced the company to refund phone purchases or offer its customers free service until the network is fully operational.

New services, large retail network will help Telus compete

Telus bought the 113-store Black’s Photo chain in 2009. That gives it about 1,000 stores through which to sell its wireless phones, and adds to its presence in Ontario. As well, it has attracted almost 200,000 subscribers to its Optik TV television service, which it delivers over phone lines in nine cities in B.C. and Alberta.

Telus also recently raised its dividend. The new annual rate of $2.00 yields 5.1%.

As we mentioned, Telus has risen over 36% in the past year. In the current Canadian Wealth Advisor, we look to see if it could go even higher.

You can get our full analysis of Telus and 18 other investments suitable for the conservative investor in the latest Canadian Wealth Advisor. What’s more, you can get this issue absolutely free when you subscribe today. Click here to learn how.

(In the latest issue of The Successful Investor, we’ve published a special analysis of all five of Canada’s big bank stocks. One of the banks, CIBC, pays an especially attractive 4.9% dividend yield — and it could be poised for further increases. Read on for full details.)

Canada’s big five bank stocks look set to resume dividend hikes

Canada’s big five bank stocks have long histories of annual dividend increases. However, rising loan losses and writedowns of illiquid securities stemming from the 2008/2009 financial crisis prompted them to conserve cash instead of raising dividends.

Banking regulators around the world are now working on new regulations that would help avoid another crisis. The new rules will probably force banks to increase their capital reserves, which would help them better absorb future loan losses.

Canada’s banks are in much better shape than banks in other countries, so they should have little trouble adapting to the new rules, which should take effect in 2011. After that, we feel Canada’s banks will start raising their dividends again.

You want to protect your "safe money" -- the part of your portfolio you're counting on for the future -- yet you want to earn more than you're getting from the bank. That's where my Canadian Wealth Advisor newsletter comes in. I'll show you several proven ways to protect and grow your safe money. Click here to learn how you can get started right away.

CIBC’s dividend yield is tops among bank stocks

Each of the big five bank stocks have different objectives, so they’re not all suitable for every investor’s portfolio. For example, Canadian Imperial Bank of Commerce (symbol CM on Toronto), could be especially appealing to an income investor because it pays a 4.8% dividend yield. That’s the highest of the big banks. CIBC is Canada’s fifth-largest bank, with total assets of $336.0 billion.

The bank continues to profit from its plan to expand its retail-banking and wealth-management operations, which are less risky than trading securities. The bank now gets 76% of its earnings from retail banking. That’s up from 64% a year ago.

CIBC aims to spur growth by expanding internationally. For example, it recently paid $150 million U.S. for a 22.5% stake in The Bank of N.T. Butterfield & Son Ltd., which is Bermuda’s largest bank.

Thanks mainly to the improving global economy, CIBC’s revenue and earnings rose sharply in the latest quarter. As well, the bank had to set aside less cash to cover bad loans: Its loan-loss provisions fell 19.8% in the current quarter, to $316 million from $394 million a year earlier.

You can get our full analysis of CIBC and the other four big banks, including clear buy/sell/hold advice, in the latest issue of The Successful Investor. What’s more, you can get this issue absolutely free when you subscribe today. Click here to learn how.

Aside from specific investments (such as stocks, income trusts or exchange-traded funds), members ask us a wide range of other kinds of investment questions, as well. So you can get a sense of how the service works, I’d like to share an example of the type of question a more conservative investor might ask. I hope you enjoy and profit from it.

Q: Dear Pat, I’m a conservative investor who just received $50,000 that is important to my retirement (which is in about 12 years), so I have to invest this money carefully. The market has fallen lately, and I’m concerned that it could drop further. As a conservative investor, I would like to know if I should invest this new money in the stock market all at once or spread it out over a certain period of time. Thanks for your help.

A: Buying gradually may make you more comfortable than plunging right in, especially if you’re a more conservative investor. However, because of the way stock-market trends typically develop, it’s likely to cost you money in the long run. If you can afford to keep your money in the market for, say, five years, then the sooner you buy the better.

Long-term studies show that the stock market as a whole generally produces total pre-tax annual returns of 8% to 10%, or around 6% after inflation. Over periods of a few years or less, the return is far more variable and always uncertain. The surest way around this is to start investing when you’re young, and invest regularly over the course of your working years. Then you can sell gradually in retirement.

You want to protect your "safe money" -- the part of your portfolio you're counting on for the future -- yet you want to earn more than you're getting from the bank. That's where my Canadian Wealth Advisor newsletter comes in. I'll show you several proven ways to protect and grow your safe money. Click here to learn how you can get started right away.

In fact, if you invest a fixed sum at regular intervals throughout your working years, perhaps increasing that sum from time to time as your income rises, you can largely forget about stock-market trends. That’s because you’ll automatically buy more shares when prices are low, and fewer when they’re high. And you’ll benefit from the long-term rising trend in the market.

This investing technique is called dollar-cost averaging. It’s a little like systematic saving, except that you put your money into stocks instead of a bank account. However, some investors try to apply the dollar-cost averaging principle to lump sums by spreading their buying out over a period of time. That’s different. This gradual buying is sometimes referred to as “averaging in.”

For instance, you could average in by investing your $50,000 in the stock market by, say, purchasing $12,500 of shares every six months over two years.

Averaging in can be psychologically comforting. However, it will only improve your long-term results if you happen to begin when the market is headed down. Since the market goes up around two thirds of the time, on average, gradual buying is likely to cost you money.

If it lets you sleep easily, averaging in may still be worthwhile. But our view is that if you expect to be able to hold on to your stocks for, say, five years, then the sooner you buy, the better.

One final point: you plan to retire in about 12 years, but that’s when you begin dipping into your retirement savings. When you invest a lump sum gradually, you lower the risk of buying just prior to a market slump. However, holding off on going into the market means you generally invest in lower-yielding fixed-return investments for a longer period. This raises your risk of running out of money during retirement.

If you have investment-related questions like these, or if you’d like to ask me about stocks you’re considering buying (or selling), you should join my Inner Circle service. Click here to learn more.

The SEC claims that Goldman Sachs misled investors about the risks of investing in certain mortgage-backed financial products. The SEC alleges that Goldman Sachs created these products with the help of a hedge-fund manager who then planned to sell short (or bet against them).

Stock markets in the U.S. and Canada fell on the news of the SEC’s claims against Goldman Sachs. Shares of Canadian bank stocks also declined slightly, but they quickly recovered. That’s mainly because investors realize that the big-five Canadian banks had limited exposure to these types of complicated and risky financial products.

The big five Canadian bank stocks are good at spotting risky investments — and staying out

Canadian banks have long demonstrated an ability to identify and stay out of complex and risky financial arrangements like those Goldman Sachs and many other international banks were participating in. That’s another good reason why we continue to recommend all five big Canadian bank stocks in our investment services and newsletters, including our flagship publication, The Successful Investor.

Canada’s bank stocks have rebounded strongly since stock markets hit their March 2009 lows. In part, that’s because their more conservative lending approaches helped them weather the credit crisis and profit during the recession.

You want to protect your "safe money" -- the part of your portfolio you're counting on for the future -- yet you want to earn more than you're getting from the bank. That's where my Canadian Wealth Advisor newsletter comes in. I'll show you several proven ways to protect and grow your safe money. Click here to learn how you can get started right away.

Keep your investment goals in mind when buying Canadian bank stocks

Each of the big five banks have different objectives, so they’re not all suitable for every investor’s portfolio. For example, Bank of Nova Scotia (symbol BNS on Toronto) has been expanding its international operations lately, so it stands to profit from rising prosperity in developing countries.

The bank recently expanded its operations in Thailand: Right now, it owns 49% of Thailand’s Thanachart Bank. Thanachart has agreed to buy rival Siam City Bank. When the deal closes later this year, the combined bank will have more than 660 branches, 2,100 automated-teller machines and 18,000 employees. That will make it Thailand’s fifth-largest bank.

Bank of Nova Scotia will contribute $650 million to maintain its 49% stake in the merged bank. That’s 66% of the $988 million, or $0.91 a share, that Bank of Nova Scotia earned in the three months ended January 31, 2010. However, this new investment should add roughly $0.10 a share to the bank’s annual earnings.

Thai unrest shouldn’t hurt Bank of Nova Scotia

Thailand continues to suffer political unrest as opposition protestors aim to topple the government of Prime Minister Abhisit Vejjajiva. The protestors argue that the prime minister is leading an illegitimate government.

However, it’s not unusual for developing countries like Thailand to suffer political unrest, as the benefits of economic growth inevitably leave some citizens behind. Moreover, Bank of Nova Scotia’s long international experience will help it deal with any further instability.

You can get our full analysis of Canada’s big-five banks, as well as clear buy/sell/hold advice on dozens of other stocks you may be considering buying (or selling) in The Successful Investor. Click here to learn how you can get one month free when you subscribe today.

The company has been working to lower its reliance on Atlantic Canada. Much of its growth has come from the assets it bought as part of this plan.

In May 2004, Fortis bought regulated electrical utilities in Alberta and B.C. for $1.5 billion in cash and stock. In May 2007, it paid $3.7 billion for the regulated gas-distribution business of Terasen Inc. (formerly called BC Gas), which has 939,600 customers in B.C. Fortis issued $1.15 billion of new common shares to help pay for this purchase.

The new operations helped Fortis earn a record $262 million in 2009, up 6.9% from $245 million in 2008. Earnings per share fell 0.7%, to $1.51 from $1.52, on 12.8% more shares outstanding. Revenue fell 6.8%, to $3.6 billion from $3.9 billion, mainly because it sold less natural gas at lower prices.

Fortis’s 2010 earnings will probably rise to $1.67 a share. The stock trades at 16.8 times that figure.

Fortis is a buy.

Today, however, some investors feel Torstar is in a long-term or “secular” decline, due to growing competition from free or low-cost news and ads on the Internet.

However, the company’s online businesses have offset some of the lost ad revenue at the print division. In January 2010, The Toronto Star’s web site (thestar.com) attracted 37% more unique visitors than in January 2009.

Torstar’s Harlequin subsidiary is the world’s largest publisher of romance novels. Its earnings have risen in each of the past three years. But meanwhile, investors focused on Torstar’s Internet competition.

The stock fell from $22 in mid-2008 to a low of $4.35 in June 2009. Since then, it has gained more than 150%, including a 70% jump in the past two months, as the economy and its prospects gathered momentum.

Despite the gain in the stock, Torstar trades at just 9.5 times the $1.16 a share it is likely to earn in 2010. That’s cheap in light of its irreplaceable brands and high-quality assets.

Torstar is a buy.

The company gets 49% of its gross profit from Canada, followed by the U.S. (41%) and the U.K. (10%).

In February 2005, Canadian brewer Molson Inc. merged with U.S.-based Adolph Coors Co. The cost savings from the merger continue to help the company compete with large international brewers.

At the time of the merger, Canadian shareholders received exchangeable shares in Molson Coors Canada. These shares carry the same voting and dividend rights as common shares of the U.S. parent company, Molson Coors Brewing Co. (New York symbol TAP).

In July 2008, the company merged its U.S. brewing operations with those of rival brewer SABMiller. Both companies have equal voting rights in this joint venture, called Miller-Coors, but Molson Coors gets 42% of the profits.

In 2009, these mergers helped Molson Coors cuts its annual costs by $206 million (all amounts except share price and market cap in U.S. dollars).

As a result, its earnings rose 40.6%, to $3.81 a share (or a total of $707.4 million) from $2.71 a share (or $502.8 million) in 2008. These figures exclude merger-related costs and other unusual items.

Molson Coors’s 2009 sales fell 36.5%, to $3.0 billion from $4.8 billion. That’s because accounting rules force Molson Coors to only include sales from its wholly owned Canadian and U.K. operations. The company does not recognize sales from MillerCoors, just its 42% interest in the partnership’s earnings.

Molson Coors is now targeting new markets for growth. For example, it recently started shipping its Coors Light beer to Trinidad & Tobago and Costa Rica. The company now sells Coors Light in over 25 countries.

Molson Coors’s strong balance sheet gives it plenty of flexibility to expand to new markets. Its long-term debt of $1.4 billion is just 17% of its market cap. The company also holds cash of $734.2 million, or $3.96 a share.

The stock trades at just 13.0 times Molson Coors’s likely 2010 earnings of $3.47 U.S. a share.

Molson Coors is a buy. The more liquid “B” shares are the better choice.

(Our special report, “Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada,” is full of safe investing strategies that you can easily put into practice right away. Click here to download your copy today.)

1. Look beyond a company’s share price: It’s a mistake to base your decision to buy or sell a stock on past stock-price performance alone. Rising and falling trends come in many shapes and sizes, depending on what’s going on in a company, its industry and the world.

A stock never gets so high that it can’t keep rising, or so low that it can’t keep falling. That’s why you have to look beyond price changes and focus on investment quality when deciding whether to buy or sell.

2. Be skeptical of companies that mainly grow through acquisitions: Making acquisitions can speed up a company’s growth, but it also adds risk that can undermine a conservative, safe investing approach. Great acquisitions are rare finds. Many acquisitions come with hidden problems or risks, or they turn out to have been over-priced.

Despite the risks, some acquisitions turn out hugely profitable. So, your safe investing strategy shouldn’t automatically discount companies that have grown through acquisitions. Just keep the risks in mind, and avoid companies that seem unaware of them.

You want to protect your "safe money" -- the part of your portfolio you're counting on for the future -- yet you want to earn more than you're getting from the bank. That's where my Canadian Wealth Advisor newsletter comes in. I'll show you several proven ways to protect and grow your safe money. Click here to learn how you can get started right away.

3. Sell if you doubt the integrity of insiders: It’s always a good safe investing strategy to sell your shares in a company if you have any doubts about the integrity of the people in charge. In other words, if you think a company is run by crooks, you should sell right away, no matter how attractive it seems as an investment. There are no limits to the ways in which unscrupulous operators can and will cheat you.

To profit from this safe investing rule — that is, to use it to enhance your long-term returns, not just avoid loss — you need to apply it in a moderate fashion. You need to distinguish between lack of integrity on the one hand, and naivete or poor judgment on the other.

Many public companies eventually run afoul of tax rules or regulatory decisions, for instance. If you take that as a sign of low integrity, you can wind up selling solid investments at market lows.

4. Resist the temptation to copy prominent investors: Sometimes you’ll hear that a stock is a good buy because some prominent investor (a company, family or individual) has a stake in it.

However, it’s important to remember that prominent investors don’t expect to profit in every investment they make. For example, sometimes they invest for strategic or political reasons, rather than profit.

To profit by copying the decisions of prominent investors, you have to copy what they do with the bulk of their money, not with token amounts of it. That’s hard to do, since prominent investors often keep their best investments hidden until they want to sell.

As a member of TSI Network, you may have already seen Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada. If you haven’t yet read this free report, click here to download your copy today. I’d also encourage you to share the report with a friend by forwarding this email to them. It’s my “thank you” just for signing up for my free daily updates.

In its first quarter, which ended January 31, 2010, the bank earned $988 million. That’s up 17.3% from $842 million a year earlier. Earnings per share rose 13.8%, to $0.91 from $0.80, on more shares outstanding. That beat the consensus earnings estimate of $0.88 a share.

Most of the gains came from the bank’s Canadian retail-banking operations, where earnings rose 27.9%. That’s mainly because low interest rates continue to fuel strong demand for home mortgages and personal loans. As well, improving financial markets have made it easier for companies to issue new shares and debt securities. That pushed up earnings at the bank’s capital-markets division by 27.0%.

However, earnings at the international-banking division fell 24.2%, as the higher Canadian dollar dampened earnings from the bank’s overseas operations. This division’s profits were also hurt by rising loan losses in the Caribbean.

Bank of Nova Scotia set aside $371 million to cover bad loans during the quarter. That’s up 32.0% from $281 million a year earlier. However, it’s an 11.7% improvement over the $420 million that the bank set aside in the previous quarter.

Bank of Nova Scotia is still a safety-conscious buy.

LOBLAW COS. $38.62 (Toronto symbol L; Shares outstanding: 276.2 million; Market cap: $10.7 billion; SI Rating: Above Average; Dividend yield 2.2%) is installing solar panels on four of its Ontario supermarkets. If this test is successful, the company will install solar panels on over 100 of its stores.

Using solar energy could cut Loblaw’s electricity costs. It could also give the company a new source of revenue, since it can sell any extra power it generates onto the power grid. Under Ontario’s new green-energy plan, power distributors must pay higher prices for electricity from renewable sources, like solar and wind. That income would help Loblaw pay for these upgrades. To top it off, this project is likely to appeal to environmentally conscious grocery shoppers.

Loblaw is a buy.

IMPERIAL OIL $40.81 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $34.6 billion; SI Rating: Average; Dividend yield: 1.0%) is the leading investor in the Mackenzie pipeline project, which would pump natural gas from the Arctic to Alberta.

The company had hoped to begin construction by now, but rising costs, falling natural-gas prices and regulatory hurdles have forced Imperial and its partners to delay the project.

Three years ago, the company estimated that the pipeline would cost $16.2 billion to build. That’s about half of Imperial’s market cap. However, an updated estimate would likely be much higher.

Energy regulators are studying the plan, and should release their final report in September 2010. Imperial will not decide whether or not to go ahead with the pipeline until late 2013. If it does decide to build the line, it could be ready in 2018.

Despite this setback, Imperial has other promising growth projects. For example, its Kearl oil-sands project should start operating in two years. Kearl’s reserves should last 40 years.

Imperial Oil is a buy.

MANITOBA TELECOM $32.89 (Toronto symbol MBT; Shares outstanding: 64.7 million; Market cap: $2.1 billion; SI Rating: Average; Dividend yield: 7.9%) is the main provider of telephone services in Manitoba. The company’s Allstream subsidiary sells integrated telephone, Internet and other communication services to businesses across Canada.

The company gets 70% of its earnings from its Manitoba telephone business. However, a new alliance with Rogers Communications Inc. (Toronto symbol RCI.B) should broaden its geographic reach.

Under the deal, the two companies are building a new high-speed wireless network in Manitoba. That will make Manitoba Telecom more competitive in the province. The deal also lets the company use Rogers’ existing network in the rest of Canada. This will help Manitoba Telecom sell more wireless services to its customers outside of Manitoba.

In 2009, Manitoba Telecom earned $103.9 million, or $1.61 a share. That’s down 29.5% from $147.4 million, or $2.28 a share, in 2008. Without one-time costs and other unusual items, earnings per share would have fallen 12.9%, to $2.64 from $3.03. Revenue fell 3.1%, to $1.8 billion from $1.9 billion.

Manitoba Telecom continues to restructure in response to the lower revenue and earnings. Its restructuring, which mainly consists of job cuts, saved the company $58.4 million in 2009. It aims to lower its annual costs by an additional $30 million to $40 million in 2010. Manitoba Telecom expects to earn between $2.00 and $2.50 a share in 2010. The stock trades at 14.6 times the midpoint of that range.

Manitoba Telecom’s $2.60-a-share dividend yields 7.9%. As well, dividend payments are a high 115.6% of the company’s expected 2010 earnings. This high payout ratio has raised fears that the company will cut the dividend. However, Manitoba Telecom’s cost cuts should help it maintain the current rate.

Manitoba Telecom is a buy.

However, the U.S. banking sector remains highly volatile. As well, the industry could face greater regulation and higher costs if the Obama administration moves ahead with its reform plans.

For example, Senate Banking Chairman Christopher Dodd recently released a bill that proposes to tax the largest bank stocks and financial institutions. The proceeds would be used to support a $50-billion U.S. fund aimed at dealing with failing banks and financial firms in the future.

Diversification is the key to lowering your risk in the U.S. finance sector

While we recommend some high-quality U.S. bank stocks in our Wall Street Stock Forecaster newsletter, we feel you can cut your risk in this sector by also investing in other types of financial companies, such as mutual-fund and insurance firms, as well.

In the current Wall Street Stock Forecaster, we update our advice on six non-bank U.S. finance-sector firms that come from all corners of the industry. One of these companies is tax preparer H&R Block (New York symbol HRB).

You want to protect your "safe money" -- the part of your portfolio you're counting on for the future -- yet you want to earn more than you're getting from the bank. That's where my Canadian Wealth Advisor newsletter comes in. I'll show you several proven ways to protect and grow your safe money. Click here to learn how you can get started right away.

H&R Block’s predictable tax business makes it less risky than many U.S. bank stocks

H&R Block is the world’s largest provider of income-tax-preparation services. It operates 11,506 offices in the U.S. (38% owned by franchisees), as well as over 900 offices in Canada and more than 370 in Australia.

Through subsidiary RSM McGladrey, H&R Block also provides tax-consulting and accounting services to businesses. As well, H&R Block offers banking services, including chequing and savings accounts, loans and credit cards issued to its tax-preparation clients. But what separates H&R Block from bank stocks is that these activities only account for a small percentage of its revenue.

Improved customer service and complex U.S. tax code should help H&R Block

The slow economy and high unemployment are prompting more tax filers to turn to tax-preparation software or free online-processing services. That’s cutting into revenue at H&R Block’s traditional tax-preparation business. As well, the weak economy is hurting demand for its accounting services from businesses.

In response, the company is working on improving its customer service. That should help it hang onto its current clients. It is also spending more on marketing to attract new customers. Another factor working in H&R Block’s favour is the increasing complexity of the U.S. tax code, which should let the company keep raising its fees.

New regulations provide long-term benefits

Like many finance-sector firms, H&R Block is also facing tighter regulations: In January 2010, the Internal Revenue Service (IRS) said it would start regulating income-tax preparers in 2011. This means tax preparers will have to register with the IRS, pass an exam and complete 15 hours of continuing education every year.

These new regulations will increase the company’s costs, of course. But, more important for H&R Block, the new requirements will cut down on competition by spurring old-timers to retire sooner, and persuading part-timers and start-ups to go into some other, less regulated line of work.

You can get our special analysis (including our clear buy/sell/hold advice) on H&R Block and five other firms from the U.S. finance sector in the latest Wall Street Stock Forecaster. What’s more, you can get this issue absolutely free. Click here to learn how.