EMERA INC. $21 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 112.4 million; Market cap: $2.4 billion; Price-to-sales ratio: 1.7; SI Rating: Average) has expanded beyond Nova Scotia in the past few years. The company supplies 95% of that province’s electrical power. For example, Emera will pay $27.6 million for 9.9% of Algonquin Power Income Fund (Toronto symbol APF.UN). Algonquin owns or has interests in 41 hydroelectric facilities in Canada and the U.S. Separately, Emera and Algonquin have formed a 50/50 joint venture that will pay $116 million U.S. for a power generation and distribution business in Lake Tahoe, California. After these transactions close in 2010, they should add $6 million to $7 million to Emera’s annual earnings. Meanwhile, Emera earned $38.1 million, or $0.33 a share, in the second quarter of 2009. That’s down 11.2% from $42.9 million, or $0.37 a share, a year earlier. Under a new arrangement with Nova Scotia power regulators, Emera incurred an extra $16.3 million of fuel expenses in the quarter. However, the deal also let it increase power rates, which will help it recover most of these extra costs. Revenue by 5.2%, to $334.2 million from $317.6 million....

FORTIS INC. $25 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 170.3 million; Market cap: $4.3 billion; Price-to-sales ratio: 1.1; SI Rating: Above Average) gets just 15% of its revenue from Newfoundland Power, its original business. In the past few years, the company has bought electrical utilities in four other Canadian provinces, as well as the U.S. and Caribbean. However, about half of its revenue now comes from Terasen Inc., which distributes natural gas in British Columbia. The company paid $3.7 billion for Terasen in May 2007. In the three months ended June 30, 2009, Fortis’s earnings jumped 82.8%, to $53 million, or $0.31 a share, from $29 million, or $0.18 a share, a year earlier. If you exclude one-time charges in the year-earlier quarter, earnings would have risen 20.5%. Terasen contributed $14 million to the latest earnings. Revenue fell 11.1%, to $754 million from $848 million. The drop was largely because of warmer-than-usual spring weather, which hurt natural-gas demand at Terasen. The stock trades at 16.7 times Fortis’s projected 2009 earnings of $1.50 a share. That’s a higher p/e ratio than other utilities, but still reasonable in light of Fortis’s high-quality operations and geographic diversity. The $1.04 dividend yields 4.2%....

In 2011, the Canadian government will begin taxing income trusts (with the exception of real estate investment trusts, or REITs). The effect the tax change will have on Canadian investors’ portfolios is something we’ve often discussed in our Canadian Wealth Advisor newsletter. When the income-tax benefits of Canadian income trusts are eliminated, some may convert to conventional corporations — the same structure as most common stocks. Others may choose to remain as trusts. Either way, some Canadian income trusts will cut their distributions. That’s because their cash available for distribution to unitholders will fall after they begin to pay corporate taxes and can’t pass it all on tax-free....

Some U.S. bank stocks have reported surprising profits lately, and some have even begun to repay loans received under the U.S. government’s Troubled Asset Relief Program. However, the sector itself remains volatile. While we recommend some high-quality U.S. bank stocks in our Wall Street Stock Forecaster newsletter, we feel that you can cut your risk by not just investing in top bank stocks, but by investing in other types of financial companies, as well. In our most recent issue of Wall Street Stock Forecaster, we update our advice on U.S. tax-preparer H&R Block (New York symbol HRB)....

One of the most concrete things about an investment is its dividend yield — the percentage you get when you divide its current yearly dividend payment by its price. It’s an indicator we pay especially close attention to when we select stocks to recommend in our Canadian Wealth Advisor newsletter. But yield, high yield especially, can give you a false sense of security. Investors in high dividend stocks have a natural tendency to think that all investment income is nearly as safe and predictable as bank interest. In fact, investment income can dry up in a heartbeat. Companies are sometimes unable to honour their commitments, and they sometimes spring the bad news on you with no warning. Rather than a sign of a bargain, high yield may be a danger sign. It may mean insiders are selling and pushing the price down. A falling price makes yield go up (because you use the latest dividend to calculate yield). When an investment does cut or halt its dividend, its yield collapses....

Many people come up with unrealistic answers to the question of how much risk is right for them. For instance, when they’re young and just starting out, many investors decide to move away from safe investing principles and speculate. They expect to build a small portfolio into a big one in a hurry, then shift their money into boring, but more dependable safe investing selections.

Rookie mistakes can be doubly costly

As a newcomer in any field, however, it’s easy to fall victim to ruses and snares that a veteran would spot right away. Later on, you’ll know better than to bid on an ugly painting just because it’s the work of a noted artist, or invest in a building that faces expensive repairs due to delayed maintenance, or buy a promotional stock due to rumours or touting....

CANADIAN TIRE CORP. $50 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.6 million; Market cap: $4.1 billion; Price-to-sales ratio: 0.5; SI Rating: Above Average) operates 476 stores that sell automotive, household and sporting goods. These account for around 60% of the company’s revenue, and 45% of its earnings. Canadian Tire also owns other retail chains, including 374 Mark’s Work Wearhouse casual-clothing stores, 274 gas stations (many have car washes and convenience stores) and 87 Part-Source auto-parts stores. Mainly on the strength of its store renovations, Canadian Tire’s sales rose 29.2%, from $7.1 billion in 2004 to $9.1 billion in 2008. Earnings jumped 43.1%, from $3.53 a share (or a total of $291.5 million) in 2004 to $5.05 a share (or $411.7 million) in 2007. The retailer’s 2008 earnings fell to $374.2 million, or $4.59 a share, because of writedowns of currency hedging contracts and gains on the sale of property and equipment. Without these non-recurring items, the company would have earned $572.5 million, or $4.85 a share....

CAE INC. $6.68 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 255.1 million; Market cap: $1.7 billion; Price-to-sales ratio: 1.0; SI Rating: Average) stands to gain from both developments. CAE makes flight simulators and operates pilot-training facilities. Lower fuel prices leave its airline customers with more cash to spend on new simulators and training. Falling oil prices cut consumer costs, leaving more funds for travel. In addition, CAE gets 90% of its revenue from customers outside of Canada. A low Canadian dollar increases the value of these sales....

TRANSCONTINENTAL INC. $8.17 (Toronto symbol TCL.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 80.8 million; Market cap: $660.1 million; Price-to-sales ratio: 0.3; SI Rating: Average) gets 50% of its revenue, and 40% of its profits, from its direct-marketing business. Through this division, Transcontinental designs direct mail and other advertising campaigns. It also analyzes customer-purchasing data. These services help its clients increase their sales and build customer loyalty. The company also has a commercial-printing business (25% of revenue, 30% of profits), and publishes newspapers and magazines (25% of revenue, 30% of profits). The recession continues to drive down demand for Transcontinental’s direct-marketing services, particularly in the U.S., where direct-marketing revenue is down 50% from a year ago. In response, the company recently closed a direct-mail plant in Pennsylvania. It has also merged some printing plants and scaled back on newspaper and magazine publishing. These moves should save Transcontinental $100 million a year. It expects to realize $75 million of these savings in its current fiscal year, which ends October 31. The company was also forced to write down $169.3 million of goodwill related to acquisitions, mostly at its commercial-printing division. Transcontinental has experienced a drop in volumes as customers print fewer newspapers, books, magazines and advertising flyers during the recession. This was a non-cash charge, and had no impact on Transcontinental’s cash flow or cash balances....

TORSTAR CORP. $5.04 (Toronto symbol TS.B; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 78.9 million; Market cap: $397.7 million; Price-to-sales ratio: 0.3; SI Rating: Above Average) publishes The Toronto Star, which is Canada’s largest daily newspaper by circulation. The company also publishes three other daily papers and over 100 weeklies, mainly in southern Ontario. Newspapers and web sites account for about 70% of Torstar’s revenue, and 60% of its earnings. The company’s other main business is wholly owned Harlequin Enterprises Ltd., the world’s leading publisher of romance-fiction books. Harlequin also publishes non-fiction titles, such as self-help and diet books. Harlequin sells 95% of its books outside of Canada, which helps reduce Torstar’s reliance on Ontario, where the recession has had a significant impact. It also helps Torstar benefit from a lower Canadian dollar. Torstar continues to suffer from lower advertising revenue at its newspapers, with real-estate and employment ads particularly hard hit. However, Torstar’s management feels that demand has stabilized following a sharp drop in the first two months of 2009. As the largest newspaper in its market, The Toronto Star is in a good position to attract advertisers as the economy recovers....