PLEASE NOTE: Our next Hotline will go out on Thursday, June 30, 2011.
WESTJET AIRLINES, $14.69, symbol WJA on Toronto, is now in the process of upgrading its “interline” agreement with Delta Air Lines to a full “code sharing” arrangement. Delta is the second-busiest U.S. airline carrier by traffic, behind United Airlines.
WestJet signed an interline agreement with Delta in February 2011. Under these agreements, two airlines co-operate on flights and baggage handling. WestJet has similar deals with Air France-KLM, China Airways of Taiwan, and Hong Kong-based Dragonair. As well, the company recently signed interline agreements with Australia’s Qantas Airlines and Japan Airlines Corp.
Under a “code sharing” agreement, WestJet would also be able to sell seats and move luggage onto Delta flights. That would let WestJet serve more cities without having to add flights of its own. WestJet now has code-sharing deals with Cathay Pacific and American Airlines.
Code-sharing agreements are especially valuable for attracting business passengers. That’s because these agreements let customers seamlessly connect between flights and gain frequent-flyer points for the entire distance travelled.
WestJet, our Stock Pickers Digest “Stock of the Year for 2011,” is still a buy.
NISSAN MOTOR CO., $20.83, symbol NSANY on Nasdaq, moved up over 4% this week, after it announced that it expects to report an operating profit of 460 billion yen ($5.7 billion U.S.) in the year ended March 31, 2011, down 14% from a year earlier.
Even so, that’s a strong performance in light of the production slowdowns and disruptions that the company experienced in the wake of the Japanese earthquake and tsunami. The estimate is also higher than the consensus operating profit estimate of 432 billion yen ($5.4 billion U.S.).
As well, Nissan expects its worldwide production to rise 9.9% this year, to 4.6 million vehicles. Rivals Toyota and Honda are both expecting production declines.
For 2012, Nissan forecasts a 7.1% revenue increase, to 9.4 trillion yen ($116.5 billion U.S). As well, Nissan plans to double its dividend to 20 yen ($0.25 U.S.) this year. That would give the shares a 1.2% yield.
Nissan’s sales are rising in all of its markets, including Europe and the U.S. as well as China and emerging markets like India, Russia and Brazil.
Nissan Motor is still a buy.
ADOBE SYSTEMS INC., $29.97, symbol ADBE on Nasdaq, reports that its earnings jumped 54.4% in its 2011 second quarter, which ended June 3, 2011, to $229.4 million from $148.6 million a year earlier.
Earnings per share rose 60.7%, to $0.45 from $0.28, on fewer shares outstanding. If you exclude one-time items, such as restructuring charges and investment losses, earnings per share would have risen 25.0%, to $0.55 from $0.44. On this basis, the latest earnings beat the consensus estimate of $0.51 a share.
Revenue rose 8.5%, to $1.0 billion from $943.0 million. The company recently upgraded its Creative Suite package of photo-editing and desktop-publishing programs. However, Adobe is seeing weaker demand in Europe. That caused the stock to fall 6% this week.
The company holds cash of $2.6 billion, or about $5.20 a share. Its long-term debt of $1.5 billion is a low 9.9% of its market cap.
Adobe is still a hold.
IAMGOLD CORP., $17.73, symbol IMG on Toronto, has raised its semi-annual dividend by 150%, to $0.10 a share, from $0.04 a share, with the July 2011 payment. The new rate gives the shares a 1.1% yield.
IAMGold plans to produce roughly a million ounces of gold this year. That would rise to 1.8 million ounces annually within five years.
IAMGold is still a buy.
THE CHURCHILL CORP., $16.85, symbol CUQ on Toronto, is now offering its shareholders the opportunity to participate in its new dividend reinvestment plan (DRIP).
The company recently announced its first-ever quarterly dividend of $0.12 a share, payable July 15. The stock now yields 2.8%.
Churchill will let investors use their dividends to buy new shares at a 5% discount to the average market price prior to the dividend payment date.
DRIPs bypass brokers, so you save on commissions. DRIPs also eliminate the nuisance effect of receiving small cash dividend payments. Generally, investors must first own and register at least one share before they can participate in a DRIP. Registration will generally cost $40-$50 per company. The investor must then notify the company that they wish to participate in the company’s DRIP.
You can register for dividend reinvestment plans at no cost through most discount brokers (these are called “synthetic DRIPs”). However, the broker may or may not pass along any reinvestment discount to you.
As well, you can only buy whole shares through these DRIPs, so dividends paid must be greater than the share price. For example, say you receive a $24 dividend, and the stock is trading at $17. Assuming the broker does not offer a reinvestment discount, you would receive one share and $7 in cash.
DRIPs help companies attract investors. They also let them conserve funds by issuing shares instead of paying out cash.
Churchill is still a buy.
Our next Hotline will go out on Thursday, June 30, 2011.