CANADIAN UTILITIES LTD. - Toronto symbols CU $39 and CU.X $39

CANADIAN UTILITIES LTD. (Toronto symbols CU [class A non-voting] $39 and CU.X [class B voting] $39; Income Portfolio, Utilities sector; Shares outstanding: 262.8 million; Market cap: $10.2 billion; Price-to-sales ratio: 2.9; Dividend yield: 2.7%; TSINetwork Rating: Above Average; www. canadianutilities.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. (see page 84) owns 53.2% of the company.

Canadian Utilities continues to invest in projects that will make Alberta’s electricity grid more reliable. For example, it is building 355 kilometres of new transmission lines and substations in the province’s southeast. So far, the company has spent $1.3 billion on this $1.8-billion project. It should begin operating in early 2015.

In all, Canadian Utilities expects to spend $5.5 billion on upgrades to its power lines and pipelines in Alberta between 2014 and 2016. These improvements will help it take advantage of rising electricity demand from oil sands projects.

In the quarter ended June 30, 2014, Canadian Utilities’ revenue rose 1.3%, to $856 million from $845 million a year earlier. Higher revenue from ongoing investments in its regulated utilities offset lower power prices at its unregulated operations. Earnings fell 28.1%, to $115 million, or $0.39 a share, from $160 million, or $0.57, partly due to higher fuel costs.

The company will probably earn $2.19 a share in 2014, and the stock trades at 17.8 times that estimate. The $1.07 dividend yields 2.7%.

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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