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ISHARES DOW JONES CANADA SELECT DIVIDEND INDEX FUND $20.08 (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 4.5%.

The fund’s top holdings are CIBC, 6.9%; National Bank, 6.0%; TD Bank, 5.6%; Bank of Montreal, 5.2%; Bonterra Energy, 5.2%; AG Growth International, 4.8%; Royal Bank of Canada, 4.3%; Bank of Nova Scotia, 4.3%; and BCE Inc., 4.0%.

The fund holds 54.1% of its assets in financial stocks. Utilities are next, at 21.4%. 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 $16.65 (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, as the fund must ensure that all sectors are represented, it holds a few stocks we wouldn’t include.

The index’s top holdings are Royal Bank, 7.2%; TD Bank, 7.0%; Bank of Nova Scotia, 5.9%; Barrick Gold, 4.4%; Suncor Energy, 4.3%; CN Railway, 3.7%; Bank of Montreal, 3.5%; Potash Corp., 3.4%; Goldcorp, 3.3%; BCE Inc., 3.2%; Canadian Natural Resources, 3.2%; Enbridge, 3.1%; TransCanada Corp., 3.0%; CIBC, 2.8%; Cenovus Energy, 2.3%; and Telus Corp., 1.9%.

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TRANSCANADA CORP. $42.76 (Toronto symbol TRP; Shares outstanding: 704.2 million; Market cap: $30.1 billion; TSINetwork Rating: Above Average; Dividend yield: 4.1%; www.transcanada.com) has won a contract to build and operate a $4-billion, 700-kilometre pipeline for Shell Canada and its partners Korea Gas, Mitsubishi and PetroChina.

The pipeline will pump natural gas from the Montney region of eastern B.C. to a proposed liquefied natural gas facility at the port of Kitimat, B.C. From there, tanker ships will transport the liquefied gas to customers in Asia.

TransCanada aims to begin operating the new line by 2020.

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INNERGEX RENEWABLE ENERGY $10.55 (Toronto symbol INE; Shares outstanding: 81.3 million; Market cap: $857.7 million; TSINetwork Rating: Extra Risk; Dividend yield 5.5%; www.innergex.com) owns and operates 25 hydroelectric and wind-power facilities in Quebec, Ontario, B.C. and Idaho.

Innergex gets 80% of its power from hydroelectric plants. Wind farms supply the remaining 20%. Wind power is heavily reliant on politically sensitive government subsidies. To cut its risk, Innergex makes sure it has firm long-term powerpurchase contracts in place before it makes acquisitions or starts building new plants.

In April 2011, Innergex bought Cloudworks Energy for $187 million. That added stakes in six operating hydroelectric plants in B.C. and other projects that are still under development.

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ALGONQUIN POWER & UTILITIES CORP. $6.55 (Toronto symbol AQN; Shares outstanding: 159.1 million; Market cap: $1.0 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.3%; www.algonquinpower.com) holds interests in 45 hydroelectric plants in Canada and the northeastern U.S. It also owns 12 thermal energy facilities. Algonquin’s wholly owned subsidiary, Liberty Water Co., owns 19 water-distribution and sewagetreatment plants in the U.S.

The company also has a partnership with Emera Inc. (Toronto symbol EMA), which is a recommendation of The Successful Investor, our conservative growth advisory. Emera holds a 25% interest in Algonquin. This partnership, called Liberty Energy Utilities, continues to make acquisitions.

Liberty Energy’s purchases include NV Energy, which sells power to 47,000 customers near Lake Tahoe; Atmos Energy, which distributes natural gas to 77,000 customers in Missouri, Iowa and Illinois; and two other utilities that sell electricity and natural gas to 126,000 customers in New Hampshire.

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CENOVUS ENERGY $32.47 (Toronto symbol CVE; Shares outstanding: 754.7 million; Market cap: $24.5 billion; TSINetwork Rating: Extra Risk; Dividend yield: 2.7%; www.cenovus.com) has received regulatory approval to develop its Narrows Lake oil sands project in northern Alberta; U.S.-based ConocoPhillips (New York symbol COP) owns 50% of this property.

Narrows Lake, which could start up in 2017, is expected to produce 130,000 barrels a day (Cenovus’s share is 65,000 barrels). To put that in context, Cenovus produced an average of 156,850 barrels a day in the first quarter of 2012. The property’s reserves should last 40 years.

The company plans to use a new technique, called a solvent-aided process, to extract the oil from Narrows Lake. That will add to the project’s development costs, but it should let the partners recover up to 15% more oil than they could using today’s methods.

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BONAVISTA ENERGY $17.42 (Toronto symbol BNP; Shares outstanding: 145.8 million; Market cap: $2.5 billion; TSINetwork Rating: Extra Risk; Dividend yield: 8.3%; www.bonavistaenergy.com) explores for oil and natural gas in Alberta, Saskatchewan and B.C.

Bonavista produces an average of 70,202 barrels of oil equivalent per day, weighted 60% to gas and 40% to oil.

In the three months ended March 31, 2012, the company’s cash flow per share fell 23.2%, to $0.63 from $0.82 a year earlier. Lower gas prices more than offset a 6.1% production increase.

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PEYTO EXPLORATION & DEVELOPMENT CORP. $18.17 (Toronto symbol PEY; Shares outstanding: 138.5 million; Market cap: $2.5 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.0%; www.peyto.com) produces and explores for oil and natural gas in Alberta.

Peyto’s average daily production of 40,903 barrels of oil equivalent is 90% gas and 10% oil.

In the three months ended March 31, 2012, the company’s cash flow was $0.56 a share, unchanged from a year earlier. Lower gas prices offset a 29.7% rise in production.

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BANK OF NOVA SCOTIA $52.20 (Toronto symbol BNS: Shares outstanding: 1.1 billion; Market cap: $57.4 billion; TSINetwork Rating: Above Average; Div. yield: 4.2%, www.scotiabank.com) is the third-largest of Canada’s five big banks, with assets of $659.7 billion.

Without one-time items, the bank earned $1.15 a share in the quarter ended April 30, 2012, up 8.5% from $1.06 a share a year earlier. It is also setting aside less money to cover bad loans: loan-loss provisions fell 2.2%, to $264 million from $270 million a year ago.

The Canadian banking division’s earnings jumped 23.3% due to an increase in deposits and higher demand for loans. The division also did a good job of controlling its costs.

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BCE INC. $42 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 775.9 million; Market cap: $32.6 billion; Priceto- sales ratio: 1.6; Dividend yield: 5.5%; TSINetwork Rating: Above Average; www.bce.ca) has 5.4 million telephone customers in Ontario and Quebec, as well as 2.1 million high-speed Internet subscribers and 2.2 million TV clients. In addition, the company’s wireless business now has 7.7 million subscribers across Canada. BCE also owns 45% of Bell Aliant (see box this page).

In the three months ended June 30, 2013, the company’s earnings fell 20.5%, to $594 million, or $0.77 a share. A year earlier, it earned $747 million, or $0.97. The drop is mainly due to non-cash losses on hedges the company uses to cut the risk of its employee stock option plans.

Revenue rose 1.5%, to $5.0 billion from $4.9 billion. Revenue from its wireline division (traditional telephone, Internet and TV; 48% of total revenue) fell 0.9%. That’s partly because more of its customers are switching to wireless service. Revenue at BCE’s wireless division (28% of revenue) rose 5.4%, thanks to strong demand for smartphones and rising mobile data use.
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Gold prices have moved down from their peak of $1,918 an ounce in August 2011 to the current price of $1,571. Gold could well regain its highs and move up even further over the longer term, although it will likely remain volatile. Higher prices would arise from investor fears that inflation or global political and economic instability will weaken key currencies, such as the euro or the U.S. dollar. If you do hold gold stocks, we recommend that you keep them to a reasonable part of the resources component of a well-balanced portfolio. YAMANA GOLD (Toronto symbol YRI; www.yamana.com) owns seven operating gold mines in Mexico, Brazil, Chile and Argentina. It also holds a 12.5% stake in the Alumbrera copper/gold mine in Argentina, and has three other properties in advanced stages of development....

This is the latest in a series of video interviews in which Pat McKeough gives his advice on a variety of topics. Some will deal with his overall investment philosophy, others on specific investment strategies and in still others he serves as an investment counsellor as he discusses events that are affecting the markets and the economy. That’s his role this week as he discusses the anxiety many have about the ongoing crisis in Greece. Pat turns the general sense of pessimism on its head—the markets frequently move up before crises are solved, while there’s often more cause to worry when things look good. And he adds an optimistic postscript about energy in the years ahead.
The Crisis in Greece: Be Ready for an Upturn...

CANADA BREAD CO. LTD. $48 (www.canadabread.ca) is seeing lower demand for its fresh baked goods. At the same time, its costs for wheat and other ingredients are rising. As a result, its earnings fell 62.5% in the first quarter of 2012, to $0.21 a share from $0.56 a year earlier....

CAE INC. $9.88 (www.cae.com) has won several contracts from military clients for flight simulators and other training equipment. In all, these deals are worth $110 million, which is equal to 6% of CAE’s annual revenue of $1.8 billion. Best Buy.

FINNING INTERNATIONAL INC. $23 (www.finning.com) earned $0.39 a share in the three months ended March 31, 2012. That’s down 7.1% from $0.42 a year earlier. If you exclude the costs of installing a new computer system that will make its Canadian operations more efficient, Finning would have earned $0.48 a share in the latest quarter....

EMERA INC. $33 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 123.5 million; Market cap: $4.1 billion; Price-to-sales ratio: 1.9; Dividend yield: 4.1%; TSINetwork Rating: Average; www.emera.com) gets 75% of its revenue and 65% of its earnings from Nova Scotia Power Inc., which is that province’s main electricity supplier. Emera also continues to expand outside Nova Scotia.

The company owns the Brunswick Pipeline, which pumps natural gas from the U.S. to a liquefied natural gas plant in Saint John, New Brunswick. It has also acquired electrical utilities in the U.S. and the Caribbean.

Revenue and earnings have soared

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BCE INC. $42 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 773.6 million; Market cap: $32.5 billion; Price-to-sales ratio: 1.6; Dividend yield: 5.2%; TSINetwork Rating: Above Average; www.bce.ca) is joining a consortium of investors, including the Ontario Teachers’ Pension Plan, to buy privately held Q9 Networks Inc., which provides data-storage and web-hosting services to businesses across Canada. Q9 has 11 data centres in Ontario, Alberta and B.C.

This investment will help BCE take advantage of growing demand from business clients for reliable cloud-computing services. BCE already operates six data centres. It will open a seventh later this year.

BCE will pay $180 million for a 30% stake in Q9 when the deal closes, probably by the end of 2012. The purchase price is equal to 31% of the $580 million, or $0.75 a share, that BCE earned in the three months ended March 31, 2012.

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TELUS CORP. (Toronto symbols T $59 and T.A $58; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 325.0 million; Market cap: $19.2 billion; Price-to-sales ratio: 1.8; Dividend yield: 4.1%; TSINetwork Rating: Above Average; www.telus.com) has won a contract to help more pharmacies in Newfoundland connect to an electronic drug database....

AGRIUM INC. $84 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 158.0 million; Market cap: $13.3 billion; Price-to-sales ratio: 0.8; Dividend yield: 1.2%; TSINetwork Rating: Average; www.agrium.com) has raised its semi-annual dividend by 122.2%, to $0.50 a share (all amounts except share price and market cap in U.S. dollars) from $0.225. The new annual rate of $1.00 yields 1.2%.

Meanwhile, some farmers have objected to the company’s $1.65-billion purchase of 232 of Viterra Inc.’s (Toronto symbol VT) 258 retail stores in western Canada, which sell seed, fertilizer and other agricultural products. However, Agrium’s competitors would still control twothirds of this market.

The deal also includes Viterra’s 17 stores in Australia, plus its 34% stake in a fertilizer plant. The deal should close in the next few weeks.

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CANADIAN IMPERIAL BANK OF COMMERCE $71 (Toronto symbol CM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 404.9 million; Market cap: $28.7 billion; Price-to-sales ratio: 1.8; Dividend yield: 5.1%; TSINetwork Rating: Above Average; www.cibc.com) continues to profit by focusing on retail banking, which accounts for 76% of its business. That cuts its reliance on its more-volatile corporate-lending and securities-trading divisions.

In its fiscal 2012 second quarter, which ended April 30, 2012, the bank earned $766 million, or $1.90 a share. That’s up 6.1% from $722 million, or $1.80 a share, a year earlier. Without unusual items, such as losses on securities that CIBC holds, earnings per share would have risen 9.3%, to $2.00 from $1.83. Revenue rose 2.3%, to $3.1 billion from $3.0 billion.

CIBC is a buy.

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MOLSON COORS CANADA INC. (Toronto symbols TPX.A $40 and TPX.B $40; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 181.1 million; Market cap: $7.2 billion; Price-to-sales ratio: 2.1; Dividend yield: 3.3%; TSINetwork Rating: Average; www.molsoncoors.com) hopes to spur sales this summer with Coors Light Iced T, a new beer mixed with tea and lemon.

Innovative products like this should help the company compete with makers of flavoured vodka and wine drinks. Molson also aims to attract more consumers who don’t typically drink beer, particularly women.

Molson Coors is a buy. The class B shares are the better choice.

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IGM FINANCIAL INC. $39 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 257.5 million; Market cap: $10.0 billion; Price-to-sales ratio: 3.7; Dividend yield: 5.5%; TSINetwork Rating: Above Average; www.igmfinancial.com) is Canada’s largest independent mutual fund company, with $117.0 billion of assets under management.

Falling stock markets continue to hurt mutual fund sales. As a result, IGM’s earnings fell 5.5%, to $199.7 million, in the three months ended March 31, 2012. A year earlier, it earned $211.2 million. Earnings per share fell 3.7%, to $0.78 from $0.81, on fewer shares outstanding. Revenue declined 5.4%, to $673.1 million from $711.4 million.

To help spur sales and compete with other fund companies, IGM is cutting the management fees on most of the mutual funds it sells through its Investors Group subsidiary. It is also changing the way it pays its salespeople, which will result in savings that will help offset the lower fee income.

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GREAT-WEST LIFECO INC. $21 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 949.8 million; Market cap: $19.9 billion; Price-to-sales ratio: 0.7; Dividend Yield: 5.9%; TSINetwork Rating: Above Average; www.greatwestlifeco.com) is Canada’s largest insurance company, with $523.0 billion of assets under administration. It also sells mutual funds, as well as retirement-planning and wealthmanagement services. Canada accounts for 53% of the company’s earnings, followed by Europe (31%) and the U.S. (16%).

In the three months ended March 31, 2012, Great-West’s earnings rose 8.7%, to $451 million, or $0.48 a share. A year earlier, it earned $415 million, or $0.44 a share. Revenue rose 3.9%, to $6.5 billion from $6.3 billion.

The gains mainly came from its European division, which earned $141 million, up 64.0% from $86 million a year earlier. That’s because it set aside $75 million in the year-earlier quarter to cover claims related to the earthquakes in Japan and New Zealand. Earnings fell 1.2% in Canada and 14.8% in the U.S.

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ANDREW PELLER LTD. $9.93 (Toronto symbol ADW.A; Income Portfolio, Consumer sector; Shares outstanding: 14.9 million; Market cap: $148.0 million; Price-to-sales ratio: 0.5; Dividend yield: 3.6%; TSINetwork Rating: Above Average; www.andrewpeller.com) is Canada’s second-largest wine producer, after Vincor Canada. Peller operates wineries in B.C., Ontario and Nova Scotia. It also imports wines and sells home-winemaking kits.

In its 2012 fiscal year, which ended March 31, 2012, Peller’s sales rose 4.3%, to $276.9 million from $265.4 million in fiscal 2011.

That’s because the company continues to launch new wines, particularly higher-priced premium wines. Its sales also benefited from a new joint venture with Wayne Gretzky Estate Winery and a recently purchased home-winemaking business.

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CENOVUS ENERGY INC. $32 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 755.6 million; Market cap: $24.2 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.8%; TSINetwork Rating: Extra Risk; www.cenovus.com) has received regulatory approval to develop its Narrows Lake oil sands project in northern Alberta; U.S.-based ConocoPhillips (New York symbol COP) owns 50% of this property.

Narrows Lake could begin operating in 2017. When it reaches full capacity, it should produce 130,000 barrels per day (Cenovus’s share is 65,000 barrels). To put that in context, Cenovus produced an average of 156,850 barrels per day in the first quarter of 2012. Narrows Lake’s reserves should last 40 years.

The company plans to use a new technique, called a solventaided process, to extract the oil from Narrows Lake. This approach will add to the project’s construction and development costs, but it should let the partners recover up to 15% more oil than current methods.

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