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EMERA INC. $33 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 122.2 million; Market cap: $4.0 billion; Price-to-sales ratio: 1.3; Dividend yield: 4.1%; TSINetwork Rating: Average; www.emera.com) will invest an extra $83 million U.S. in seven American wind-power projects after its partner, Algonquin Power & Utilities Corp. (Toronto symbol AQN), dropped out of the joint venture. As a result, Emera will pay $333 million U.S. for 49% of this venture; First Wind Holdings LLC owns the remaining 51%. That’s roughly equal to nine months’ cash flow.

Wind power relies heavily on politically sensitive government subsidies. However, wind projects represent just a small portion of Emera’s overall operations.

Emera is a buy.

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CANADIAN UTILITIES LTD. (Toronto symbols CU [class A non-voting] $62 and CU.X [class B voting] $62; Income Portfolio, Utilities sector; Shares outstanding: 127.6 million; Market cap: $7.9 billion; Price-to-sales ratio: 1.6; Dividend yield: 2.9%; TSINetwork Rating: Above Average; www.canadianutilities.com) distributes electricity and natural gas in Alberta. It also operates 19 power plants in Canada, Australia and the U.K.

The company has a higher p/e ratio than ATCO: the stock trades at 15.4 times Canadian Utilities’ likely 2012 earnings of $4.02 a share.

However, Canadian Utilities’ shares are more liquid. As well, its higher dividend makes it a better choice for income-seeking investors. Canadian Utilities recently raised its quarterly dividend by 9.9%, to $0.4425 a share from $0.4025. The new annual rate of $1.77 yields 2.9%.

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ATCO LTD. (Toronto symbols ACO.X [class I non-voting] $61 and ACO.Y [class II voting] $61; Income Portfolio, Utilities sector; Shares outstanding: 57.7 million; Market cap: $3.5 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.1%; TSINetwork Rating: Above Average; www.atco.com) is a holding company. Its main subsidiary is 52.7%-owned Canadian Utilities.

ATCO has four main divisions: Utilities (which distributes electricity and natural gas); Energy (which operates power plants); Structures & Logistics (which provides buildings and related services, such as fire protection, to construction and resource companies); and its Australian business (which operates power plants and distributes natural gas in Australia.) ATCO owns 75.5% of the Structures division; Canadian Utilities owns the remaining 24.5%.

The Structures business continues to win new contracts. For example, in January 2012, it signed a deal with Husky Energy to provide housing and related services to workers at the Sunrise Energy oil sands project in Alberta.

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ENCANA CORP. $19 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 736.3 million; Market cap: $14.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 4.0%; TSINetwork Rating: Average; www.encana.com) is one of North America’s largest natural gas producers. The company prefers to focus on large unconventional reserves, including shale gas, which is natural gas that is trapped in rock formations. To extract it, companies must pump water and chemicals into the rock. This fractures the rock and releases the natural gas. Encana’s proven and probable reserves could last 23 years.

In 2011, the company agreed to sell $3.5 billion of non-essential assets (all amounts except share price and market cap in U.S. dollars).

The sales are part of Encana’s plan to focus on its main gas-producing properties in Alberta, B.C., Wyoming, Michigan, Colorado and Louisiana. The company will also use the proceeds to maintain its quarterly dividend of $0.20 U.S. a share, for a 4.0% annualized yield.

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BANK OF NOVA SCOTIA $52 (Toronto symbol BNS; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.1 billion; Market cap: $57.2 billion; Price-to-sales ratio: 2.1; Dividend yield: 4.0%; TSINetwork Rating: Above Average; www.scotiabank.com) is raising $1.7 billion by selling up to 33 million common shares for $50.25 each. The bank is also thinking about selling Scotia Plaza, its 68-storey office tower in downtown Toronto. Bank of Nova Scotia could get up to $1 billion for this building.

The cash from these sales will help Bank of Nova Scotia comply with new international regulations that require banks to maintain more capital to cover potential loan losses.

A stronger balance sheet will also help the bank pursue more acquisitions, particularly in fast-growing markets in Asia and Latin America.

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BELL ALIANT INC. $28 (Toronto symbol BA, Conservative Growth Portfolio, Utilities sector; Shares outstanding: 229.1 million; Market cap: $6.4 billion; Price-to-sales ratio: 2.3; Dividend yield: 6.8%; TSINetwork Rating: Average; www.bellaliant.ca) sells telephone and Internet services to 2.6 million customers in Atlantic Canada, as well as rural parts of Ontario and Quebec. The company also sells wireless services through an alliance with BCE Inc., which owns 43.8% of Bell Aliant.

We’ve lowered Bell Aliant’s TSINetwork Rating to Average from Above Average. It’s still prominent in its industry, with a record of steady profits and dividends, and its balance sheet remains strong. However, it faces rising competition across all of its businesses. In addition, many of its phone customers are giving up their land lines and switching to wireless devices.

Bell Aliant is still a buy.

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CENOVUS ENERGY INC. $38 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 754.3 million; Market cap: $28.7 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.1%; TSINetwork Rating: Extra Risk; www.cenovus.com) operates three oil sands projects in Alberta and one in Saskatchewan.

Cenovus ships the heavy bitumen from these properties to refineries in Illinois and Texas. U.S.-based ConocoPhillips (New York symbol COP) owns 50% of the refineries, as well as 50% of Cenovus’s main Foster Creek and Christina Lake oil sands projects in Alberta.

Cenovus gets about half of its output from the oil sands. Conventional oil and natural gas wells supply the other half.

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IMPERIAL OIL LTD. $48 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $40.7 billion; Price-to-sales ratio: 1.4; Dividend yield: 1.0%; TSINetwork Rating: Average; www.imperialoil.ca) is Canada’s third-largest publicly traded oil company, after Suncor and Canadian Natural Resources Ltd. Imperial is a 69.6%-owned subsidiary of U.S.-based ExxonMobil Corp. (New York symbol XOM).

Higher oil prices pushed up Imperial’s earnings by 52.5% in 2011, to $3.4 billion, or $3.95 a share. In 2010, it earned $2.2 billion, or $2.59 a share. Revenue rose 22.4%, to $30.7 billion from $25.1 billion. Cash flow per share rose 33.0%, to $4.70 from $3.53.

Imperial gets most of its oil from its Cold Lake oil sands project in Alberta. In 2011, Cold Lake’s daily production rose 11.1%, to a record 160,000 barrels from 144,000 barrels in 2010. That offset lower production of conventional oil and natural gas.

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SUNCOR ENERGY INC. $35 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.6 billion; Market cap: $56.0 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.3%; TSINetwork Rating: Average; www.suncor.com) became Canada’s largest integrated oil company in 2009, when it merged with Petro-Canada. It gets 60% of its production from its oil sands projects in Alberta; the remaining 40% is conventional oil and natural gas. Suncor also operates four refineries and 1,500 gas stations under the Petro-Canada banner.

Thanks to a 27.5% jump in its average realized oil price, Suncor’s earnings rose 12.4% in 2011, to $4.3 billion from $3.8 billion in 2010.

Earnings per share rose 9.9%, to $2.67 from $2.43, on more shares outstanding. If you exclude unusual items, such as gains and losses on asset sales, earnings per share would have jumped 115.0%, to $3.59 from $1.67. Cash flow per share rose 46.0%, to $6.16 from $4.22.

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GENNUM CORP. $13.50 (Toronto symbol GND; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 35.5 million; Market cap: $477.8 million; Price-to-sales ratio: 3.5; Dividend yield: 1.0%; TSINetwork Rating: Average; www.gennum.com) soared 119% in one day after the company accepted a $13.55-a-share takeover offer from U.S.-based Semtech Corp. (Nasdaq symbol SMTC). It’s clear that Semtech shares our high opinion of this well-managed junior company.

Gennum went through a sharp setback in the recession, as TV broadcasters had less to spend on the company’s equipment, which lets them store, edit and transfer video signals.

That’s why the stock fell from $14.50 in January 2007 to just $3.50 in December 2008. It rebounded to $8.35 in February 2011, but moved down to $5.75 in December 2011.

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ENBRIDGE INC. $39 (Toronto symbol ENB; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 779.2 million; Market cap: $30.4 billion; Price-to-sales ratio: 1.6; Dividend yield: 2.9%; TSINetwork Rating: Above Average; www.enbridge.com) gets 85% of its revenue by operating pipelines that pump crude oil and natural gas from western Canada to eastern Canada and the U.S. The company’s pipelines handle 65% of all western Canadian crude oil exports.

The remaining 15% of revenue mainly comes from distributing natural gas to 2 million consumers in Ontario, Quebec, New Brunswick and New York State.

Enbridge’s revenue rose 51.5%, from $10.6 billion in 2006 to $16.1 billion in 2008. Revenue fell 22.7% in 2009, to $12.5 billion, as the recession cut gas sales and prices. New pipelines pushed up revenue by 21.3%, to $15.1 billion, in 2010.

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FORTIS INC. $33 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 186.9 million; Market cap: $6.2 billion; Price-to-sales ratio: 1.7; Dividend yield: 3.6%; TSINetwork Rating: Above Average; www.fortis.ca) is the main electricity supplier in Newfoundland and Prince Edward Island. It also operates power plants in other parts of Canada, the U.S. and the Cayman Islands.

Fortis had hoped to buy Central Vermont Public Service Corp. (New York symbol CV), which distributes electricity in Vermont, but it was outbid by Quebec natural gas distributor Gaz Metro LP. As a result, Fortis received a breakup fee of $11 million (after tax). Fortis also sold a 40% stake in its power poles in Newfoundland for $46 million. This cash will help the company pursue more acquisitions in the U.S.

Fortis probably earned $1.69 a share in 2011. The stock trades at 19.5 times that figure. It also trades at 18.8 times Fortis’s projected 2012 earnings of $1.76 a share. These are high p/e ratios for a utility that gets over 90% of its revenue from slow-growing regulated businesses.

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Pat McKeough responds to many personal questions on specific stocks and other investing topics from the members of his Inner Circle. Every week, his comments and recommendations on a selection of the most intriguing questions of the past week go out to all Inner Circle members. And every Friday, we offer you one of the highlights from these Q&A sessions. This week, one Inner Circle question concerned a potentially fast-growing stock market investment, convenience store chains. Pat looks at how one U.S. chain is doing following its successful fight to resist a takeover bid from a big Canadian chain. ...

Investors often ask us why we don’t publish price targets for the stocks we recommend in our newsletters and investment services. After all, stock price targets commonly appear in brokerage and media reports. There are several reasons we do not follow this practice. The main one stems from a key piece of our stock trading advice: predictions are the least reliable part of the investment decision-making process....

Trading in futures is a necessity for farmers, but a risky business for most investors. Trading in futures is a long-established and perfectly

DEVON ENERGY CORP. (New York symbol DVN; www.dvn.com) is one of the largest U.S.-based oil and natural-gas explorers and producers. Its production mix is 65% gas and 35% oil. In May 2011, Devon completed the sale of its Brazilian operations for $3.2 billion. It has now sold all of its international and Gulf of Mexico properties, which it saw as risky and expensive to develop....

As the stock market rebounded in 2009 from one of the worst crises in years, Pat McKeough was invited by Jonathan Chevreau of the Financial Post to appear on his ‘Wealthy Boomer’ telecast. In a two-part interview, Pat aired his views on a wide variety of investment subjects. Now, with the stock market coming off last autumn’s lows, we think it’s an appropriate time to replay the interview. Pat discusses not only specific solutions for volatile markets, but also how his investment advice applies in all market conditions. Here is part two of the interview, entitled “Spreading investments” on YouTube. (View part one here: Pat McKeough’s investment ideas as shown on YouTube.)...

3M COMPANY $88 (New York symbol MMM; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 694.5 million; Market cap: $61.1 billion; Price-to-sales ratio: 2.1; Dividend yield: 2.7%; TSINetwork Rating: Above Average; www.3m.com) makes over 55,000 different products. It was formerly known as Minnesota Mining & Manufacturing.

The company owns a range of well-known brands, including Post-it notes, Scotch tape, Scotch-Brite household cleaning products, Scotchguard protection and Thinsulate insulation.

3M has six main business segments: industrial and transportation (roughly 33% of sales and 31% of earnings), health care (17%, 22%), consumer and office (14%, 12%), safety, security and protection (13%, 12%), display and graphics (12%, 12%), and electronics and communications (11%, 11%).

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DIAGEO PLC ADRs $94 (New York symbol DEO; Conservative Growth Portfolio, Consumer sector; ADRs outstanding: 625.6 million; Market cap: $58.8 billion; Price-to-sales ratio: 3.6; Dividend yield: 2.8%; TSINetwork Rating: Above Average; www.diageo.com) continues see strong demand for its top brands, such as Smirnoff vodka, Johnnie Walker scotch whisky and Captain Morgan rum, in fast-growing markets like Latin America and Africa. The company now gets 40% of its sales from emerging markets.

In the six months ended December 31, 2011 (Diageo’s fiscal year ends June 30), the company’s revenue rose 8.2%, to 5.8 billion pounds from 5.3 billion pounds a year earlier (1 British pound = $1.57 Canadian). Due to an unusual tax charge, earnings per ADR fell 20.3%, to 1.53 pounds from 1.92 pounds a year earlier (each American Depositary Receipt represents four Diageo common shares). Without this charge, earnings would have risen 16.0%.

Diageo is a buy.

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GENERAL MILLS INC. $39 (New York symbol GIS, Conservative Growth Portfolio, Consumer sector; Shares outstanding: 644.7 million; Market cap: $25.1 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.generalmills.com) reports that sales of its cereals, soups and baking products are falling in the U.S. That’s making it hard for the company to pass along rising ingredient costs. Increasing competition is also forcing it to spend more on advertising.

As a result, General Mills now feels that it will earn $2.54 a share in its 2012 fiscal year, which ends May 31, 2012. That’s down from its earlier forecast of $2.60 a share. Even so, the stock trades at a reasonable at 15.4 times the new estimate. Moreover, the company continues to expand internationally, which cuts its risk.

General Mills is a buy.

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IDEXX LABORATORIES INC. $89 (Nasdaq symbol IDXX; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 55.1 million; Market cap: $4.9 billion; Price-to-sales ratio: 4.0; No dividends paid; TSINetwork Rating: Average; www.idexx.com) earned $2.78 a share in 2011, up 17.3% from $2.37 in 2010. Revenue rose 10.4%, to $1.2 billion from $1.1 billion.

Sales of the company’s Pro-Cyte Dx hematology analyzer, which processes animal blood tests in just two minutes, continue to rise. This device cuts veterinarians’ reliance on external labs and lowers their costs. Demand is also increasing in overseas markets. For example, Idexx recently received approval to market this device in Japan.

Idexx feels that its revenue will rise by 7% to 8% in 2012. However, the stock trades at 29.0 times the company’s likely 2012 earnings of $3.07 a share. That high p/e ratio makes the stock vulnerable to a sudden drop if Idexx fails to meet its revenue or earnings growth targets.

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BRIGGS & STRATTON CORP. $18 (New York symbol BGG; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 49.8 million; Market cap: $896.4 million; Price-to-sales ratio: 0.4; Dividend yield: 2.4%; TSINetwork Rating: Above Average; www.briggsandstratton.com) is closing plants in Tennessee and the Czech Republic due to declining sales of lawn mowers and snow blowers. It will shift some the production from these plants to other facilities in the U.S. The company expects to complete these closures by May 2012.

These moves will cost Briggs between $50 million and $55 million. To put that in context, it earned $63.2 million, or $0.48 a share, in the fiscal year ended June 30, 2011. However, the closures should cut Briggs’ yearly costs by $18 million to $20 million.

Briggs & Stratton is a hold.

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FRONTIER COMMUNICATIONS CORP. $4.59 (Nasdaq symbol FTR; Income Portfolio, Utilities sector; Shares outstanding: 995.1 million; Market cap: $4.6 billion; Price-to-sales ratio: 0.9; Dividend yield: 8.7%; TSINetwork Rating: Average; www.frontier.com) sells telephone, high-speed Internet and video services to 5.3 million customers in 27 states.

The company has cut its quarterly dividend by 46.7%, to $0.10 a share from $0.1875. The new annual rate of $0.40 yields 8.7%. The cut should free up cash that Frontier can use to lower its $8.2-billion long-term debt, which is a high 1.8 times its market cap. It also needs to keep investing in its network upgrades.

Frontier is still a hold.

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VERIZON COMMUNICATIONS INC. $38 (New York symbol VZ, Conservative Growth Portfolio, Utilities sector; Shares outstanding: 2.8 billion; Market cap: $106.4 billion; Price-to-sales ratio: 1.0; Dividend yield: 5.3%; TSINetwork Rating: Average; www.verizon.com) is the largest provider of wireless
services in the U.S., with 108.7 million subscribers. Wireless accounts for 63% of its revenue. It also has 24.1 million phone and Internet customers.

In 2011, Verizon added 6.3 million new wireless subscribers (net of deactivations) and 278,000 new high-speed Internet customers. These gains offset the loss of 1.9 million phone customers.

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AT&T INC. $30 (New York symbol T; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 5.9 billion; Market cap: $177.0 billion; Price-to-sales ratio: 1.4; Dividend yield: 5.9%; TSINetwork Rating: Average; www.att.com) gets 50% of its revenue from its 103.2 million wireless customers. The other 50% mainly comes from its 39.0 million telephone clients and 16.4 million high-speed Internet users.

The company recently cancelled its plan to buy rival wireless carrier T-Mobile from Germany’s Deutsche Telekom AG; AT&T felt that competition regulators would have blocked the deal.

As a result, AT&T will pay Deutsche Telekom a $4-billion breakup fee, consisting of $3 billion in cash and $1 billion of wireless spectrum. That’s partly why AT&T’s earnings fell 80.1% in 2011, to $3.9 billion, or $0.66 a share. In 2010, it earned $19.9 billion, or $3.35 a share. Without unusual items, earnings per share would have fallen 3.9%, to $2.20 from $2.29.

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