Canadian stock picks: Strong quarter for Toromont

Toromont Industries Ltd., $30.60, symbol TIH on Toronto, operates two divisions: the equipment group distributes a broad range of Caterpillar and industrial equipment; the compression group builds natural-gas compression units. In the three months ended March 31, 2011, the Canadian stock pick’s revenue jumped 38.3% to $588.0 million from $425.3 million a year earlier. Enerflex Systems, which Toromont bought for $613 million in January 2010, was the main reason for the increase. Enerflex brought new oil and gas compression customers to Toromont. It also expanded Toromont’s international presence. Earnings rose 13%, to $0.26 a share from $0.23 a share. Order bookings were up 27% in the latest quarter from a year earlier. The company’s total backlog now stands at $1 billion, up 59% from a year ago. The company’s shareholders have now approved the spinoff of Enerflex. The new Toromont will continue to distribute Caterpillar and industrial equipment; Enerflex will sell natural-gas production and processing equipment. Existing Toromont shareholders will exchange each of their Toromont shares for shares in both the new Toromont and Enerflex. Investors will not have to pay capital-gains taxes until they sell their new shares. After the breakup, the two companies will pay dividends that combined will equal the current annual rate of $0.64 per share paid by Toromont. That gives the shares a current yield of 2.1%. You can get our clear buy/sell/hold advice on Toromont and dozens of other Canadian stock picks that may be appropriate for the part of your portfolio you devote to aggressive investing when you subscribe to Stock Pickers Digest. What’s more, you can get the latest issue absolutely free. Click here to learn how.

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Scott Clayton

Scott is an associate editor at TSI Network. He is the lead reporter and analyst for Dividend Advisor, Power Growth Investor and Canadian Wealth Advisor and a member of the Investment Planning Committee. Scott began his investment and financial career working with Pat McKeough at The Investment Reporter in the 1980s. Subsequently, he worked at the Financial Post Corporation Service for 10 years. He joined TSI Network in 1998. He is a Bachelor of Economics graduate of York University, and he also has an M.B.A. from the Schulich School of Business.

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