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VERESEN $15.15 (Toronto symbol VSN; Shares
outstanding: 169.8 million; Market cap: $2.6 billion; TSINetwork Rating: Average; Dividend yield: 6.6%) owns and operates energy pipelines and processing plants. Its major holding is its 50% stake in the Alliance gas pipeline, which runs 3,000 kilometres from Fort St. John, B.C., to Chicago. Enbridge owns the other 50%.

To diversify its operations and grow beyond Canada, Veresen has successfully expanded its power generation business. It now owns hydroelectric plants in New York State and B.C.; natural gas-fired plants in Ontario, California and Colorado; and waste heat plants in B.C. and Saskatchewan.

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BELL ALIANT INC. $28 (Toronto symbol BA: Shares outstanding: 227.8 million; Market cap: $6.4 billion; TSINetwork Rating: Average; Yield: 6.8%; www.aliant.ca) sells telephone and Internet services to 2.8 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, which owns 43.8% of Bell Aliant.

We’re lowering 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. But it faces rising competition across all of its businesses. In addition, many of its phone customers are switching to wireless devices—owning a telephone land line is becoming less and less of a habitual behaviour for many Canadians.

Bell Aliant is still a buy.

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PEMBINA PIPELINE CORP. $27.59 (Toronto symbol PPL; Shares outstanding: 167.3 million; Market cap: $4.6 billion; TSI Network Rating: Average; Yield: 5.7%; www.pembina.com) is buying rival Provident Energy for $3.2 billion.

The Provident purchase diversifies Pembina’s operations and should immediately add to its cash flow. As a result, the company is raising its monthly dividend by 3.8%, to $0.135 from $0.13. The shares now yield 5.7%.

We’re raising Pembina’s TSINetwork Rating to Average from Extra Risk.

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PENN WEST PETROLEUM $21.63 (Toronto symbol PWT; Shares outstanding: 469.4 million; Market cap: $10.2 billion; TSINetwork Rating: Average; Dividend yield: 5.0%; www.pennwest.com) has raised its production by over 56% over the last five years. It is now one of North America’s largest oil and gas producers.

The company has made big investments in its operations in order to boost its production. Even so, its $2.9 billion of long-term debt is a reasonable 28.4% of its market cap. It has also lowered its debt from $3.5 billion at the start of 2010.

Penn West converted from a trust to a corporation on January 1, 2011. However, it has $7.0 billion of tax pools that it is using to offset the new tax. That’s letting it maintain its $1.08-a-share annual payout, which yields 5.0%. As well, the payout (like all dividends paid by converted trusts) is now eligible for the dividend tax credit if you hold your shares outside an RRSP.

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PENGROWTH ENERGY CORP. $9.98 (Toronto symbol PGF; Shares outstanding: 329.3 million; Market cap: $3.3 billion; TSINetwork Rating: Average; Dividend yield: 8.4%; www.pengrowth.com) has improved its dividend
reinvestment plan (DRIP).

The company is now giving investors who are enrolled in the plan two options: they can reinvest their dividends in additional shares at a 5% discount to the market price, or they can receive a premium cash dividend equal to 102% of the regular dividend. Right now, Pengrowth pays monthly dividends of $0.07 a share. The annual rate of $0.84 yields 8.4%. The annual premium dividend rate of $0.86 yields 8.6%.

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BONAVISTA ENERGY $23.49 (Toronto symbol BNP; Shares outstanding: 162.5 million; Market cap: $3.8 billion; TSINetwork Rating: Extra Risk; Divd. yield: 6.1%; www.bonavistaenergy.com) explores for oil and natural gas in Alberta, Saskatchewan and B.C. It converted from an income trust to a dividend paying stock on December 31, 2010.

Bonavista produces an average of 71,636 barrels of oil equivalent per day, weighted 62% to gas and 38% to oil.

In the quarter ended September 30, 2011, Bonavista’s cash flow per share rose 6.3%, to $0.84 from $0.79.

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PEYTO EXPLORATION & DEVELOPMENT CORP. $18.87 (Toronto symbol PEY; Shares outstanding: 133.1 million; Market cap: $2.5 billion; TSINetwork Rating: Extra Risk; Dividend yield: 3.8%; www.peyto.com) produces and explores for oil and natural gas in Alberta. In response to Ottawa’s income trust tax, Peyto converted from a trust to a dividend paying stock on December 31, 2010.

Peyto’s average daily production of 36,390 barrels of oil equivalent (including natural gas) is 89% gas and 11% oil.

In the three months ended September 30, 2011, Peyto’s cash flow rose 34.8%, to $0.62 a unit from $0.46 a year earlier. The shares trade at 7.1 times the company’s forecast 2012 cash flow of $2.65 a share. Peyto’s long-term debt of $490 million is a low 19.6% of its $2.5-billion market cap.

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ISHARES CDN REIT SECTOR INDEX FUND $15.72 (Toronto symbol XRE; buy or sell through brokers; ca.ishares.com) holds the 13 Canadian real estate investment trusts (REITs) in the S&P/TSX Capped REIT Index. The weight of any one REIT is limited to 25% of the ETF’s value.

iShares CDN REIT’s expenses are just 0.55% of its assets. The fund yields 4.7%.

As mentioned, RioCan REIT is the fund’s largest holding, at 23.9%, followed by H&R REIT (13.1%), Canadian REIT (8.5%), Calloway REIT (8.2%), Dundee REIT (7.0%), Boardwalk REIT (6.9%), Canadian Apartment Properties REIT (6.5%), Primaris Retail REIT (5.8%), Allied Properties REIT (4.4%), Cominar REIT (4.4%), Chartwell Seniors Housing REIT (4.3%), Artis REIT (4.3%) and Extendicare REIT (2.3%).

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RIOCAN REAL ESTATE INVESTMENT TRUST $25.79 (Toronto symbol REI.UN; Units outstanding: 267.0 million; Market cap: $6.9 billion; TSINetwork Rating: Average; Dividend yield: 5.4%; www.riocan.com) is Canada’s largest REIT. It has interests in 331 shopping malls in Canada, including 10 under development. These properties contain over 91 million square feet of leasable area.

RioCan also owns stakes in 38 malls in the U.S. through joint ventures. In addition, it owns 14% of Cedar Shopping Centers, a U.S. REIT whose malls are mainly in the northeastern U.S.

In the three months ended September 30, 2011, revenue rose 15.1%, to $236 million from $205 million a year earlier. Cash flow per unit rose 5.7%, to $0.37 from $0.35. RioCan’s units yield 5.4%.

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Just a few years ago, the North American automobile industry was in a deep slump and some long-established names appeared to be on the verge of failing. But while General Motors is still struggling to regain profitability, its biggest Detroit rival has engineered a strong turnaround and is making expansion plans. FORD MOTOR CO. (New York symbol F; www.ford.com) is the second-biggest carmaker in the U.S., and the world’s fifth-largest....

MCGRAW-HILL COMPANIES INC. $42 (New York symbol MHP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 293.4 million; Market cap: $12.3 billion; Price-to-sales ratio: 2.0; Dividend yield: 2.4%; TSINetwork Rating: Average; www.mcgraw-hill.com) announced in September 2011 that it will split into two separate, publicly traded companies. One of these new firms, McGraw-Hill Markets, will sell a variety of financial-information products. This business will include Standard & Poor’s, which provides credit ratings on bonds, and McGraw-Hill’s J.D. Power market-research firm. McGraw-Hill Markets will have annual revenue of $4 billion. International sales will account for 40% of that total. The other company, McGraw-Hill Education, will publish textbooks for schools and colleges. This business will have $2.4 billion of annual revenue....

ROYAL BANK OF CANADA $54 (www.rbc.com) has formed a new alliance with Shoppers Drug Mart, which operates over 1,200 drug stores in Canada. Under the deal, Shoppers’ customers can use a new Royal Bank Visa credit card to earn reward points on their purchases....

PENGROWTH ENERGY CORP. $9.90 (www.pengrowth.com) will focus on developing its western Canadian oil properties in 2012. Due to lower natural gas prices, it will hold off on further investments in its gas properties during the year. Buy.

TORSTAR CORP. $8.96 (www.torstar.com) recently bought Heartsong Presents Book Club, a publisher of Christian romance novels, for an undisclosed sum through its Harlequin book-publishing subsidiary. This purchase nicely complements Harlequin’s “Love Inspired” line of inspirational novels....

CGI GROUP INC. $20 (Toronto symbol GIB.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 258.9 million; Market cap: $5.2 billion; Price-to-sales ratio: 1.2; No dividends paid; TSINetwork Rating: Extra Risk; www.cgi.com) is Canada’s largest provider of computer outsourcing services. It also operates in 15 other countries. Canada and the U.S. each accounted for 47% of its revenue in the latest fiscal year; Europe and Asia supplied the remaining 6%.

The company often uses acquisitions to fuel its growth. It cuts the risk of this strategy by focusing on smaller companies that enhance its products or expand its geographic reach.

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METRO INC. $52 (Toronto symbol MRU; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 100.7 million; Market cap: $5.2 billion; Price-to-sales ratio: 0.5; Dividend yield: 1.7%; TSINetwork Rating: Average; www.metro.ca) has converted its class A subordinate voting shares (one vote per share) and class B multiple voting shares (16 votes per share) into a single class of common shares (one vote per share). The new shares trade under the MRU symbol (old symbol MRU.A).

Meanwhile, the supermarket operator’s sales rose 3.4% in the three months ended December 17, 2011, to $2.7 billion from $2.6 billion a year earlier. Metro recently paid $157.3 million for 55% of Marché Adonis, which sells foods from Greece, Turkey, Lebanon and other Mediterranean countries. This purchase added $33 million to Metro’s sales in the quarter. On a same-store basis, sales rose 1.7%.

Earnings rose 8.6%, to $103.7 million from $95.5 million. Earnings per share rose 11.0%, to $1.01 from $0.91, on fewer shares outstanding. The company also raised its quarterly dividend by 11.7%, to $0.215 a share from $0.1925. The new annual rate of $0.86 yields 1.7%.

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MANITOBA TELECOM SERVICES INC. $32 (Toronto symbol MBT; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 65.7 million; Market cap: $2.1 billion; Price-to-sales ratio: 1.2; Dividend yield: 5.3%; TSINetwork Rating: Average; www.mtsallstream.com) announced that its Allstream division has connected 2,388 buildings in Canada to its fibre optic network....

SNC-LAVALIN GROUP INC. $53 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 150.9 million; Market cap: $8.0 billion; Price-to-sales ratio: 1.2; Dividend yield: 1.6%; TSINetwork Rating: Average; www.snclavalin.com) has won a contract to install new containment and ventilation equipment in a Romanian nuclear power plant. SNC will complete this project in 2013.

The contract is worth $48 million, which is less than 1% of the company’s annual revenue of $7 billion. However, this deal could lead to more contracts from nuclear power producers, particularly as they invest in new safety equipment after the Fukushima nuclear plant in Japan was damaged by the March 2011 earthquake and tsunami.

SNC-Lavalin is a buy.

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TELUS CORP. (Toronto symbols T $57 and T.A $54; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 324.5 million; Market cap: $18.5 billion; Price-to-sales ratio: 1.8; Dividend yield: 4.1%; TSINetwork Rating: Above Average; www.telus.com) has paid an undisclosed sum for Wolf Medical Systems, which makes software that helps hospitals and clinics convert patient records to electronic form.

Doctors can also use Wolf’s products to access this information from a wide variety of devices, including smartphones and tablet computers.

Adding Wolf’s expertise enhances Telus’s current electronic health record services. There is also plenty of room for the company to grow in this market: right now, just 32% of Canada’s medical records are digital.

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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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