TRANSALTA CORP. $20 (Toronto symbol TA; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 197.8 million; Market cap: $4 billion; Price-to-sales ratio: 1.3; SI Rating: Average) operates over 50 electrical-power plants in Canada, the United States and Australia. TransAlta uses coal to generate 60% of its electricity, and owns three coal mines (two in Alberta and one in Washington State). This helps keep its costs down. Natural gas fuels 30% of the company’s electricity production, and hydroelectric and other sources account for 10%. This heavy dependence on coal has made TransAlta a target for environmentalists. To comply with tougher carbon-emission regulations, the company has teamed up with TransCanada Corp. to capture and store carbon emitted from TransAlta’s coal-fired power plants. The project could cost $400 million. The federal government plans to contribute $20 million to $30 million, and the two companies will probably split the rest....

FORTIS INC. $23 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 169.8 million; Market cap: $3.9 billion; Price-to-sales ratio: 0.9; SI Rating: Above Average) generates and distributes electricity in five Canadian provinces. It also owns power plants in the U.S. and Caribbean, as well as hotels and commercial real estate in Atlantic Canada.

Fortis is still benefiting from its July 2007 purchase of Terasen Inc., which distributes natural gas in B.C. In the three months ended March 31, 2009, Fortis’s revenue rose 4.8%, to $1.2 billion from $1.1 billion.

Terasen, driven by higher rates and increased natural gas use during the winter, accounted for 60% of this. Earnings rose 1.1%, to $92 million from $91 million. However, earnings per share fell 5.5%, to $0.52 from $0.55, on more shares outstanding. Gains at Fortis’s Canadian power plants offset a 43% drop at its Caribbean operations, as colder-than-usual weather and the recession hurt tourism. (The Caribbean power plants account for 7% of Fortis’s revenue.) Terasen’s earnings were flat.

Fortis is taking advantage of low real-estate prices to add to its properties division, which generates 4% of its revenue. In April, it paid $7 million for the 214-room Holiday Inn Select hotel in Windsor, Ontario. Despite the recession, this division is maintaining an occupancy rate of 96.0%, down slightly from 96.6% a year earlier.

The company has asked regulators for permission to raise rates at its Canadian operations this year (this includes Terasen). However, continued weakness at Fortis’s Caribbean operations will probably weigh on this year’s earnings. The stock trades at 15.3 times the company’s projected 2009 earnings of $1.50 a share. That’s a higher p/e than other utilities, but reasonable in light of Fortis’s high-quality operations and geographic diversity. The $1.04 dividend yields 4.5%.

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EMERA INC. $20 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 112.3 million; Market cap: $2.2 billion; Price-to-sales ratio: 1.7; SI Rating: Average) generates and distributes electricity to roughly 600,000 customers in Nova Scotia and Bangor, Maine. Over the past few years, Emera has steadily expanded into new areas in order to cut its reliance on Nova Scotia, which still accounts for 85% of its revenue. It owns 12.9% of the Maritimes & Northeast natural-gas pipeline and 50% of a hydroelectric facility in Massachusetts. Emera has also expanded into the Caribbean region. In January 2007, it paid $22 million for 19% of the main power utility in St. Lucia. Last September, it bought 25% of Grand Bahama Power Company for $41 million. In April 2009, Emera formed a partnership with Algonquin Power Income Fund (Toronto symbol APF.UN), which owns or has interests in 41 hydroelectric facilities in Canada and the United States. Emera will pay $27.6 million for a 9.9% stake in Algonquin, with an option to buy an additional 5% of the fund over the next two years....

These are difficult times for income-seeking investors. Bonds yield around half of what they did 10 years ago, yet more and more investors are nearing retirement, when many pay close attention to investment income. Many also see income as a sign of investment quality. These factors have kept up investor interest in income trusts.

Despite Ottawa’s plan to start taxing trust distributions in 2011, income trusts should continue to pay above-average yields for years to come. Unfortunately, however, high current yields on the majority of trusts obscure their drawbacks.

Income seekers may mistakenly assume that yearly distributions on income trusts will hold steady, like interest on a bond, or rise, like dividends on a stock. But, in the long term, many trust distributions are apt to dwindle, or abruptly halt. That’s because many trusts own so-called “cash cow” businesses. These are businesses that can be milked for their cash flow for many years, but are likely to stagnate or stumble as the economy changes and competition grows.

Other income trusts borrowed to invest in cyclical industries. When the cycle turns downward, as it is now, profits and cash flow will evaporate overnight.

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Dividend reinvestment plans (or DRIPs) are plans offered by some companies that let shareholders receive additional shares in lieu of cash dividends. DRIPs can be a good way to slowly build wealth over a long period, for a number of reasons. First, they eliminate the nuisance of receiving small cash dividend payments. Second, some of them let you reinvest your dividends in additional shares at a 5% discount to current prices. Third, many dividend reinvestment plans also allow optional commission-free share purchases on a monthly or quarterly basis. To participate in these plans, you have to buy one or more shares of a company’s stock, and get a certificate registered in your name. Share registration (through a traditional or discount broker) can cost $40 or more per company. Then you call or write the company to ask for the form you fill out to enroll in the plan....

DUNDEE CORP. $5.10 (Toronto symbol DC.A; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 74.3 million; Market cap: $378.9 million; Price-to-sales ratio: 0.3; SI Rating: Average) is a holding company with subsidiaries in three main areas: wealth management, real estate and resources. Its main asset is its 49% stake (63% voting interest) in Dundee-Wealth Inc. (Toronto symbol DW). DundeeWealth provides investment management, securities brokerage, financial planning and investment advisory services. It also owns the Dynamic family of mutual funds. In all, Dundee-Wealth manages $56.2 billion worth of assets. In 2008, Dundee lost $196.3 million, or $2.62 a share. The loss was largely caused by writedowns of securities, including a $113.8-million charge related to its holdings of asset-backed commercial paper. In 2007, Dundee earned $277.6 million, or $3.49 a share. This figure included a $136.6-million gain on the sale of subsidiaries. Revenue fell 12.2%, to $1.2 billion from $1.4 billion. Dundee’s stock continues to be held back by fears of more writedowns of illiquid securities. As well, lower prices for oil, gold and other commodities have hurt the value of its resource-related investments. The recession could also hurt Dundee’s residential real-estate development business....

GREAT-WEST LIFECO INC. $16 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 943.9 million; Market cap: $15.1 billion; Price-to-sales ratio: 0.6; SI Rating: Above Average) is Canada’s largest insurance company. Great-West administers $339 billion worth of assets. The company also offers wealth-management services. It operates in Canada (55% of its earnings), Europe (35%) and the U.S. (10%). Power Corp. (Toronto symbol POW) owns 72.7% of Great-West’s shares. In August 2007, Great-West paid $4.2 billion for U.S.-based mutual-fund manager Putnam Investments. Buying Putnam gave Great-West an opportunity to cross-promote its products to Putnam’s large base of individual and institutional clients. The stock market downturn has lowered the value of Putnam’s assets. This hurts Putnam’s earnings, since its fees rise and fall with the value of the securities in its funds. Moreover, the market’s volatility has caused many of Putnam’s clients to redeem their funds. Consequently, Putnam’s assets under management fell 27% in 2008, to $129 billion U.S. from $176.7 billion U.S. in 2007....

CANADIAN TIRE CORP. $45 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.5 million; Market cap: $3.7 billion; Price-to-sales ratio: 0.4; SI Rating: Above Average) operates 475 stores that sell automotive, household and sporting goods. It also operates 86 PartSource auto-parts stores, 372 Mark’s Work Wearhouse casual-clothing stores and 273 gas stations. Canadian Tire continues to replace its older stores with new ones that are more shopper-friendly. The new stores have wider aisles, brighter lighting and clearer signage. On average, its stores are a third larger than they were five years ago. These improvements contributed, at least in part, to a rise in Canadian Tire’s sales last year. Its sales rose 6%, to $9.1 billion from $8.6 billion the previous year. Same-store sales rose 0.3%. However, earnings fell 4.5%, to $572.5 million from $599.9 million. Per-share earnings fell 2.2%, to $4.85 from $4.96 on fewer shares outstanding. These figures exclude writedowns of hedging contracts and other items. The earnings drop was largely caused by higher administrative and advertising costs....

PENGROWTH ENERGY TRUST $7.13 (Toronto symbol PGF.UN; Aggressive Growth Portfolio, Resources sector; Units outstanding: 256.1 million; Market cap: $1.8 billion; Price-to-sales ratio: 1.0; SI Rating: Average) is one of North America’s largest energy royalty trusts. It owns all or part of several oil and natural-gas properties in Alberta, British Columbia and Saskatchewan. Properties that Pengrowth operates account for 63% of its production. The remaining 37% comes from minority investments in other energy projects, including an 8.4% interest in the Sable Offshore Energy Project south of Nova Scotia. Natural gas provides 60% of Pengrowth’s production. Oil supplies the remaining 40%. Pengrowth prefers to focus on proven properties with sizeable reserves and predictable production rates. It has interests in six of western Canada’s top nine oil-producing areas....

HOME CAPITAL GROUP INC. $25 (Toronto symbol HCG; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 34.4 million; Market cap: $860 million; Price-to-sales ratio: 1.9; SI Rating: Average) is the parent company of Home Trust Company, a federally regulated firm that specializes in residential first mortgages and credit cards for borrowers who don’t meet the criteria of traditional lenders. The credit crisis and Home Capital’s reliance on less-creditworthy customers caused the stock to drop from $41 last May to $14 in November. However, Home Capital is safer than it appears. Its stringent screening process eliminates most of the problem borrowers. Still, 0.86% of Home Capital’s loans were in default in 2008. This is up from 0.72% the previous year. Despite the volatile economy, Home Capital’s 2008 earnings rose 20.4%, to $108.7 million, or $3.13 a share. It earned $90.2 million, or $2.59 a share, in 2007. Revenue rose 23.3% in 2008, to $454.7 million from $368.9 million in 2007....