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DUNDEE REIT $33.17 (Toronto symbol D.UN; TSINetwork Rating: Extra Risk) (416-365-3535; www.dundeereit.com; Units outstanding: 104.4 million; Market cap: $3.7 billion; Dividend yield: 6.8%) owns and manages 24.1 million square feet of office and retail space across Canada.

As the Canadian economy improves, the trend in interest rates is likely to be upward. That rise—or the anticipation of an increase—can push down prices of REITs and high-yielding stocks, such as utilities. That’s largely why a number of REITs, including Dundee, have moved down lately.

When interest rates rise, REITs may suffer because they have a lot of mortgage debt, and it’s more expensive to raise money and refinance existing loans. As well, their units, which typically offer high yields, compete with fixed-income instruments for investor interest.

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The new U.S. health care law (“Obamacare”) will force Baxter International to pay a 2.3% tax on certain medical devices it sells in the country. However, the law will also expand health insurance to more Americans, which should spur demand for the company’s products. It is also increasing its overseas sales. The U.S. accounts for just 40% of Baxter’s sales....

Most gold stocks have moved down lately, along with gold prices. (Gold is down from almost $1,800 U.S. an ounce in September 2012 to $1,384 today.)...

Pat McKeough responds to many requests for advice on specific stocks and other questions on investment and the economy from the members of his Inner Circle. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle....

IBM (New York symbol IBM; www.ibm.com) started up in 1911, which makes it the world’s oldest computer company. Today, it operates in over 170 countries....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a beginning or experienced investor, these weekly updates are designed to give you specific stock investment advice. Each Investor Toolkit update gives you a fundamental piece of investing strategy, and shows you how you can put it into practice right away....

BONAVISTA ENERGY $15.94 (Toronto symbol BNP; Shares outstanding: 179.1 million; Market cap: $2.9 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.3%; www.bonavistaenergy.com) explores for oil and gas in Alberta, Saskatchewan and B.C. Its production is 62% gas and 38% oil.

In the three months ended December 31, 2012, cash flow per share fell 37.4%, to $0.57 from $0.91 a year earlier. Gas prices declined by 12.7%, to $3.22 per thousand cubic feet from $3.69. Production dropped 2.1%, to 71,842 barrels of oil equivalent a day (including gas) from 73,373.

Bonavista recently cut its monthly dividend by 41.7%, to $0.07 from $0.12. That’s helping it save cash for exploration and development. The new annual rate of $0.84 a share still yields a high 5.3%. As well, Bonavista now pays out just 36% of its cash flow as dividends, so more cuts are unlikely.
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PEYTO EXPLORATION & DEVELOPMENT CORP. $28.80 (Toronto symbol PEY; Shares outstanding: 148.5 million; Market cap: $4.3 billion; TSINetwork Rating: Extra Risk; Dividend yield: 2.5%; www.peyto.com) produces and explores for oil and natural gas in Alberta. Its average daily production of 49,754 barrels of oil equivalent is 89% gas and 11% oil.

In the three months ended December 31, 2012, the company’s cash flow was $0.62 a share, up 3.3% from $0.60 a year earlier. A 26.3% rise in production offset lower gas prices.

The shares trade at 9.8 times Peyto’s forecast 2013 cash flow of $2.95 a share. The company’s long-term debt of $580 million is a low 13.5% of its $3.4-billion market cap.
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CANADIAN PACIFIC RAILWAY $123.16 (Toronto symbol CP; Shares outstanding: 174.6 million; Market cap: $21.9 billion; TSINetwork Rating: Average; Dividend yield: 1.1%; www.cpr.ca) continues to benefit from a major restructuring plan, which includes new locomotives, better tracks and software that optimizes train loads and speeds.

In the first three months of 2013, CP’s earnings jumped 52.8%, to $217 million, or $1.24 a share. That beat the consensus estimate of $1.21. A year earlier, the company earned $142 million, or $0.82 a share.

Revenue rose 8.6%, to $1.5 billion from $1.4 billion. The company saw revenue gains from shipping consumer and industrial products (up 24.8%), fertilizers (up 20.6%), grain (up 9.0%), coal (up 8.8%) and forest products (up 6.0%). That offset declines in automotive products (down 7.6%) and intermodal (down 4.2%).
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RIOCAN REAL ESTATE INVESTMENT TRUST $28.93 (Toronto symbol REI.UN) has teamed up with ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST $30.71 (Toronto symbol AP.UN) and privately held Diamond Corp. to buy the Globe & Mail lands in downtown Toronto. Currently the home of The Globe & Mail newspaper, the 252,617-square-foot property is on 6.47 acres of land forming part of the large city block bounded by Spadina Avenue and Front, Draper and Wellington Streets.

The partners plan to redevelop the property into a retail-office complex. RioCan and Allied will each own 40%, while Diamond will hold 20%. RioCan and Allied will each pay $14.9 million for their stakes.

RioCan is a buy....

POWERSHARES QQQ ETF $70.39 (Nasdaq symbol QQQQ; buy or sell through brokers; www.invescopowershares- .com), formerly called Nasdaq 100 Trust Shares, holds stocks that represent the Nasdaq 100 Index. That index consists of the 100 largest shares on the Nasdaq exchange, based on market cap.

The Nasdaq 100 Index contains shares of companies in a number of major industries, including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain financial companies. The fund’s expenses are about 0.20% of its assets.

The index’s highest-weighted stocks are Apple, Microsoft, Qualcomm, Google, Cisco Systems, Intel, Amazon.com, Oracle Corp., Comcast Corp. and Amgen.
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SPDR DOW JONES INDUSTRIAL AVERAGE ETF $146.74 (New York symbol DIA; buy or sell through brokers; www.spdrs.com) holds the 30 stocks that make up the Dow Jones Industrial Average.

The fund’s top holdings are IBM, ExxonMobil, Chevron, 3M, Travelers Companies, McDonald’s, Johnson & Johnson, Caterpillar, United Technologies and Boeing. The fund’s expenses are about 0.17% of its assets.

SPDR Dow Jones ETF is a buy.
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ISHARES DOW JONES CANADA SELECT DIVIDEND INDEX FUND $22.02 (Toronto symbol XDV; buy or sell through brokers; ca.ishares.com) holds 30 of the highest-yielding Canadian stocks. Its selections are based on dividend growth, yield and payout ratio. The weight of any one stock is limited to 10% of its assets. The fund’s MER is 0.50%. It yields 4.3%.

The fund’s top holdings are CIBC, 6.5%; Bonterra Energy, 6.4%; National Bank, 5.8%; TD Bank, 5.5%; Bank of Montreal, 5.3%; Telus Corp., 4.9%; BCE Inc., 4.4%; Royal Bank, 4.4%; Bank of Nova Scotia, 4.1%; and IGM Financial, 4.1%.

The fund holds 51.4% of its assets in financial stocks. The top Canadian finance stocks have sound prospects. However, if you invest in this ETF, be sure to adjust the rest of your portfolio so it won’t be overly concentrated in the financial sector.
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ISHARES S&P/TSX 60 INDEX FUND $17.66 (Toronto symbol XIU; buy or sell through brokers; ca.ishares.com) is a good low-fee way to buy the top stocks on the TSX. The units are made up of stocks that represent the S&P/TSX 60 Index, which consists of the 60 largest, most heavily traded stocks on the exchange. Expenses are just 0.17% of assets.

The index mostly consists of high-quality companies. However, it must ensure that all sectors are represented, so it holds a few we wouldn’t include.

The index’s top holdings are Royal Bank, 7.8%; TD Bank, 6.7%; Bank of Nova Scotia, 6.0%; Suncor Energy, 4.6%; Bank of Montreal, 3.6%; CN Railway, 3.6%; Potash Corp., 3.3%; Enbridge, 3.1%; Trans- Canada Corp., 3.0%; BCE, 3.0%; CIBC, 2.9%; Canadian Natural Resources, 2.9%; Barrick Gold, 2.9%; Goldcorp, 2.6%; Manulife Financial, 2.3%; Cenovus Energy, 2.2%; and Telus, 1.9%.
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ENBRIDGE INC. $47.11 (Toronto symbol ENB; Shares outstanding: 806.5 million; Market cap: $38.8 billion; TSINetwork Rating: Above A v e r a g e ; D i v i d e n d y i e l d : 2 . 7 % ; www.enbridge.com) has formed a 50/50 partnership with France’s EDF Energies Nouvelles to buy the Blackspring Ridge wind farm in Alberta for $600 million.

This facility will produce 300 megawatts of power when it’s finished in mid-2014; Enbridge now generates 1,169 megawatts of wind power.

Blackspring Ridge has long-term, fixed-price deals in place for its power. That cuts the risk of this investment. Expanding its renewable energy holdings also helps Enbridge improve its relationships with regulators and environmentalists.
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VERESEN $13.32 (Toronto symbol VSN; Shares outstanding: 198.4 million; Market cap: $2.7 billion; TSINetwork Rating: Average; Yield: 7.5%) owns pipelines, power plants and gas processing facilities across North America. A major holding is 50% of the Alliance gas line, which runs 3,000 kilometres between Chicago and Fort St. John, B.C. Enbridge owns the other 50%. Veresen also owns the Alberta Ethane Gathering System, and Veresen and Enbridge together hold 85.4% of the Aux Sable NGL plant.

In February 2012, Veresen paid Encana Corp. $920 million for the Hythe/Steeprock natural gas gathering and processing complex. Encana signed a long-term deal to buy most of this facility’s gas.

To diversify beyond pipelines and gas-processing plants, Veresen continues to expand its power generation business. It now owns hydroelectric facilities in New York State and B.C.; natural gasfired plants in Ontario, California and Colorado; and waste-heat plants in B.C. and Saskatchewan.
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PEMBINA PIPELINE $32.69 (Toronto symbol PPL; Shares outstanding: 294.9 million; Market cap: $10.2 billion; TSINetwork Rating: Average; Divd. yield: 5.0%; www.pembina.com) owns pipelines that carry half of Alberta’s conventional oil production, 30% of Western Canada’s natural gas liquids (NGLs) and almost all of B.C.’s conventional oil output.

In the quarter ended December 31, 2012, revenue rose 170.4%, to $1.3 billion from $468.1 million a year earlier. In April 2012, it paid $3.2 billion for rival Provident Energy, which extracts, transports and stores NGLs. Provident was the main reason for the higher revenue.

Cash flow rose 161.5%, to $172.3 million from $66.0 million. Cash flow per share rose 51.3%, to $0.59 from $0.39, because Pembina issued more shares to pay for Provident.
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BANK OF NOVA SCOTIA $57.83 (Toronto symbol BNS: Shares outstanding: 1.2 billion; Market cap: $69.2 billion; TSINetwork Rating: Above Average; Dividend yield: 4.2%, www.scotiabank.com) has acquired 50% of AFP Horizonte, which manages pension funds in Peru, for $260 million. This business has 1.4 million clients and $9 billion U.S. of assets under management. SURA Asset Management owns the other 50%.

Demand for pension fund services is growing quickly in Latin America. As well, Bank of Nova Scotia has a long history in this region, which cuts the risk of this investment.

The bank and SURA plan to divide AFP Horizonte in the next few weeks. Following the split, Bank of Nova Scotia will merge this business with its existing pension plan operations in Peru. The combined business will have 1.9 million clients and $10.3 billion U.S. in assets under management.
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VANGUARD EMERGING MARKETS ETF $43.30 (New York symbol VWO; buy or sell through brokers) aims to track the FTSE Emerging Transitions Index, which is made up of common stocks of companies located in developing countries around the world. The fund has an MER of just 0.18%.

Vanguard Emerging Markets ETF’s top holdings include Samsung Electronics (South Korea), China Mobile (China: wireless), Petroleo Brasileiro SA (Brazil: oil and gas), Taiwan Semiconductor (Taiwan: computer chips), Vale SA (Brazil: mining), Banco Bradesco (Brazil: banking), Gazprom (Russia: gas utility), China Construction Bank, Itau Unibanco Holding SA (Brazil: banking), Industrial & Commercial Bank of China and CNOOC Limited (China: oil and gas).

The $74.6-billion fund’s breakdown by country is as follows: China (18.6%), Brazil (14.3%), Taiwan (11.1%), India (8.1%), South Africa (8.1%), South Korea (7.7%), Russia (6.4%), Mexico (5.6%), Malaysia (4.1%), Indonesia (3.2%), Thailand (3.0%), Turkey (2.3%), Chile (2.2%), Poland (1.4%) and others (3.9%).
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VANGUARD GROWTH ETF $78.17 (New York symbol VUG; buy or sell through brokers) aims to track the CRSP U.S. Large Cap Growth Index, a broadly diversified index that mainly consists of shares of large U.S. companies. The fund’s MER is just 0.10%.

The $27.0-billion Vanguard Growth ETF’s top holdings are Apple, IBM, Google, Coca-Cola, Philip Morris International, Oracle, Wal-Mart, Schlumberger, Qualcomm and Home Depot.

The fund’s breakdown by industry is as follows: Information Technology (27.2%), Consumer Discretionary (20.3%), Consumer Staples (12.5%), Industrials (12.3%), Health Care (11.5%), Financials (6.4%), Energy (6.0%), Materials (3.1%), Telecommunication Services (0.6%) and Utilities (0.1%).
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IBM $199.63 (New York symbol IBM; Shares outstanding: 1.1 billion; Market cap: $224.8 billion; TSINetwork Rating: Above Average; Dividend yield: 1.9%) reported lower-than-expected earnings and revenue for the latest quarter.

In the three months ended March 31, 2013, the company earned $3.00 a share before one-time items, up 7.9% from $2.78. The gain was mainly the result of IBM’s ongoing efforts to cut costs and improve productivity. Even so, the latest earnings missed the consensus estimate of $3.05 a share.

Revenue fell 5.1%, to $23.4 billion from $24.7 billion. That also fell short of the consensus estimate of $24.6 billion. IBM gets two-thirds of its revenue from overseas. If you adjust for foreign-exchange rates, overall sales would have declined by 3%.
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LOBLAW COMPANIES $44.75 (Toronto symbol L; Shares outstanding: 281.8 million; Market cap: $12.1 billion; TSINetwork Rating: Above Average; Dividend yield: 2.0%; www.loblaw.ca) is Canada’s largest food retailer, with about 1,000 stores.

In the three months ended March 23, 2013, Loblaw’s sales rose 3.8%, to $7.2 billion from $6.94 billion a year earlier. Overall sales at its supermarkets rose 3.4%, while same-store sales rose 2.8%. Revenue from its financial services division, which mainly issues credit cards, rose 27.9%. Before one-time items, earnings rose 11.6%, to $0.48 a share from $0.43.

As mentioned, Loblaw has announced a plan to form a REIT that will hold $7 billion of its properties. Right now, the company owns 47 million square feet of real estate with a market value of $9 billion to $10 billion. After this transaction closes in mid-2013, Loblaw will sell units of the REIT to the public. It will hang on to a majority stake.
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CALIAN TECHNOLOGIES $20.35 (Toronto symbol CTY; www.calian.com) operates in two areas: the business and technology services division (which supplies 70% of Calian’s revenue) provides engineers, health care workers and other skilled professionals to clients on a contract basis. The systems engineering division (30% of revenue) sells hardware and software for testing, operating and managing satellite and other communication systems....

IGM FINANCIAL INC. (Toronto symbol IGM; www.igmfinancial.com) is Canada’s largest independent mutual fund company, with $125.8 billion of assets under management. Power Financial owns 58.4% of IGM....

PENGROWTH ENERGY CORP. $5.07 (www.pengrowth.com) continues to develop its Lindbergh oil sands project in Alberta. When this operation begins commercial production late next year, it should produce 12,500 barrels a day. That’s equal to 14% of the 89,702 barrels a day that Pengrowth produced in the first three months of 2013....