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FORTIS INC. $40 (Toronto symbol FTS; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 283.1 million; Market cap: $11.3 billion; Price-to-sales ratio: 1.7; Dividend yield 3.8%; TSINetwork Rating: Above Average; www.fortisinc.com) owns electrical utilities across Canada and in the U.S. and Caribbean. It also distributes natural gas in British Columbia. In February 2016, Fortis agreed to buy ITC Holdings Corp. (New York symbol ITC), which owns 25,100 kilometres of high-voltage power lines in the U.S. Midwest. Fortis is paying $6.9 billion U.S. in cash and shares; ITC shareholders will own 27% of the combined company. Fortis will also list its shares on the New York Stock Exchange; its shares will continue to trade in Toronto....
CANADIAN UTILITIES LTD. (Toronto symbols CU [class A non-voting] $35 and CU.X [class B voting] $35; Income Portfolio, Utilities sector; Shares outstanding: 267.0 million; Market cap: $9.3 billion; Price-to-sales ratio: 2.8; Dividend yield: 3.7%; TSINetwork Rating: Above Average; www.canadianutilities.com) distributes electricity and natural gas in Alberta and Australia. It also operates 15 power plants in Canada (13) and Australia (2). ATCO Ltd. (see right) owns 53.1% of the company. Due to lower power prices in Alberta and the sale of its information technology subsidiary, the company’s earnings in 2015 dropped 50.5%, to $352 million from $711 million in 2014. Per-share earnings fell 56.0%, to $1.11 from $2.52 on more shares outstanding. Without unusual items, earnings fell 16.0%. Revenue declined 9.3%, to $3.3 billion from $3.6 billion. In December 2015, the company completed and started operating a 485-kilometre power line in eastern Alberta. This is the longest transmission line in Alberta’s history. Other new projects include a gas pipeline and power plant in Mexico, and four underground gas-storage facilities in Alberta....
ATCO LTD. (Toronto symbols ACO.X [class I non-voting] $39 and ACO.Y [class II voting] $39; Income Portfolio, Utilities sector; Shares outstanding: 115.0 million; Market cap: $4.5 billion; Price-to-sales ratio: 1.1; Dividend yield: 2.9%; TSINetwork Rating: Above Average; www.atco.com) gets most of its earnings from its 53.1% stake in Canadian Utilities (see page 44). It also owns 75.5% of ATCO Structures & Logistics, which makes temporary buildings for construction, mining and energy exploration firms; Canadian Utilities owns the other 24.5%. In December 2015, the company sold its ATCO Emissions Management subsidiary for $60 million. This business helps producers of oil, gas and electricity reduce air and noise pollution....
IMPERIAL OIL LTD. $40 (Toronto symbol IMO; Conservative Growth and Income Portfolios, Shares outstanding: 847.6 million; Market cap: $33.9 billion; Price-to-sales ratio: 1.4; Dividend yield: 1.4%; TSINetwork Rating: Average; www.imperialoil.ca) plans to expand its oil sands operations in the Cold Lake area of northern Alberta. In 2015, Cold Lake supplied 158,000 barrels a day, or 43% of Imperial’s average daily production of 366,000 barrels a day. This expansion will cost $2 billion. It should produce an additional 50,000 barrels a day by 2022. Imperial’s expertise with solvent assisted, steam-assisted gravity drainage technology should help cut its operating costs. That process also creates fewer greenhouse gasses than conventional extraction methods. Imperial Oil is a buy.