CANADIAN UTILITIES LTD. - Toronto symbols CU $37 and CU.X $37

CANADIAN UTILITIES LTD. (Toronto symbols CU [class A non-voting] $37 and CU.X [class B voting] $37; Income Portfolio, Utilities sector; Shares outstanding: 265.2 million; Market cap: $9.8 billion; Price-to-sales ratio: 2.9; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.canadian utilities.com) distributes electricity and natural gas in Alberta and Australia. It also operates 18 power plants in Canada, Australia and the U.K. ATCO Ltd. owns 53.2% of the company.Between 2015 and 2017, Canadian Utilities plans to spend $5.8 billion on its utility operations, including building a 485- kilometre power line in eastern Alberta. This $1.8-billion project should start up by the end of 2015.

Other projects include a new gas pipeline and power plant in Mexico and four underground gas-storage facilities in Alberta. Meanwhile, lower gas prices and demand cut Canadian Utilities’ revenue by 8.9% in the three months ended June 30, 2015, to $780 million from $856 million a year earlier. Overall earnings dropped 62.6%, to $43 million from $115 million, while per-share profits declined 69.2%, to $0.12 from $0.39, on more shares outstanding. The latest earnings included a charge related to an increase in Alberta’s corporate tax rate. Without this and other unusual items, profits rose 18.8%, to $101 million from $85 million. Lower power demand and rates in Alberta will probably cut the company’s 2015 earnings by 21.4% from 2014, to $1.98 a share. The stock trades at 18.7 times that estimate. However, Canadian Utilities’ new projects will likely push up its 2016 earnings to $2.30 a share, and the stock trades at an attractive 16.1 times that forecast. The $1.18 dividend yields 3.2%. The class A non-voting shares are more liquid than the class B voting shares. Canadian Utilities class A stock is a buy.

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