EMERA INC. $33 - Toronto symbol EMA

EMERA INC. $33 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 122.2 million; Market cap: $4.0 billion; Price-to-sales ratio: 1.3; Dividend yield: 4.1%; TSINetwork Rating: Average; www.emera.com) gets most of its revenue from Nova Scotia Power Inc., which is Nova Scotia’s main electricity supplier. The rest comes from its investments in pipelines, power plants and wind-power projects in the U.S. and Caribbean.

The company is using its steady cash flow to invest in new projects that will spur its long-term growth. The biggest is a joint venture with the Newfoundland government to transmit power from a proposed hydroelectric plant at Muskrat Falls on Labrador’s Churchill River to Newfoundland. Emera will pay $600 million for 29% of this business.

Emera will also spend $1.2 billion to build an undersea cable which will transmit 20% of the Muskrat Falls plant’s power to Nova Scotia. Emera will own 100% of this cable. The entire project should begin operating around 2016.

Meanwhile, Emera earned $40.8 million in the quarter ended September 30, 2011, up 1.2% from $40.3 million a year earlier. Earnings per share fell 5.7%, to $0.33 from $0.35, on more shares outstanding. Revenue rose 25.9%, to $496.1 million from $394.0 million, mainly due to the company’s recently purchased Caribbean utilities.

The stock trades at 20.1 times the $1.64 a share that Emera probably earned in 2011, and at 19.1 times its likely 2012 earnings of $1.73 a share. The annual dividend rate of $1.35 a share yields 4.1%.

Emera is a buy.

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