acquisition strategy

Pat McKeough responds to many personal questions on specific stocks and other investment topics 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. This past week, an Inner Circle member asked about one of the Canadian dividend stocks that was an income fund before the trust tax of 2011. This company raises revenue in a variety of ways, including the franchising of its company-owned gas stations, which allows it to collect commissions without high overhead. ...

Parkland Fuel Corp., $13.88, symbol PKI on Toronto (Shares outstanding: 65.7 million; Market cap: $911.9 million, www.parkland.ca), operates gas stations, convenience stores and a fuel distribution business, mostly in western Canada and Ontario. The company was called Parkland Income Fund prior to its conversion to a dividend-paying corporation on December 31, 2010. Parkland owns 163 rural gas stations and convenience stores. Its brands include Fas Gas Plus, Race Trac Gas and Short Stop (convenience stores). Many stations sell propane in addition to gasoline and diesel fuel. The company also operates Esso gas stations in western Canada and Ontario under a licensing deal with Imperial Oil Ltd. (symbol IMO on Toronto)....

DUNDEE REIT $37.67 (Toronto symbol D.UN; TSINetwork Rating: Speculative) (416-365-3535; www.dundeereit.com; Shares outstanding: 86.0 million; Market cap: $3.2 billion; Dividend yield: 5.8%) owns and manages 18.9 million square feet of office, industrial and retail space. The trust has a 95.6% occupancy rate. In the three months ended March 31, 2012, Dundee’s revenue jumped 64.9%, to $150.0 million from $91.0 million a year earlier. Most of the increase came from properties the trust recently purchased.

The best way to assess a real estate investment trust’s operating performance is to look at its cash flow, and Dundee’s cash flow rose 62.6% in the latest quarter, to $41.0 million from $25.2 million. Cash flow per unit rose 14.5%, to $0.63 from $0.55, due to more units outstanding (the trust issued new units to pay for the acquired properties).

Dundee’s growth-by-acquisition strategy adds risk, but it is diversifying outside western Canada. At the start of 2010, about 70% of its properties were in western Canada. That’s now down to less than 55%.

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Pat McKeough responds to many personal questions on specific stocks and other investment topics 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. This past week, one Inner Circle member requests Pat’s stock investing advice on a company that has a chance to profit from the growing global demand for clean water. One of the company’s biggest areas of growth could be in the highly-publicized area of “fracking” for oil and gas, where it has acquired a new water monitoring service. ...

Xylem Inc., $25.65, symbol XYL on New York (Shares outstanding: 185.4 million; Market cap: $4.6 billion; www.xyleminc.com), sells equipment and services related to managing water. The company’s products help its clients collect, distribute, use and return water to the environment. Xylem is a Greek-derived word that refers to vascular tissue that carries water and nutrients through plants. The company operates through two divisions:...

STANTEC INC. $30.90 (Toronto symbol STN; TSINetwork Rating: Extra Risk) (780-917-7288; www.stantec.com; Shares outstanding: 45.5 million; Market cap: $1.4 billion; Dividend yield: 1.9%) sells a range of consulting, project delivery, design/build and technology services. The company’s clients operate in a wide variety of markets, including industry, environment, transportation and construction. Stantec has over 11,000 employees at 170 locations throughout North America. It also has four international offices. In the three months ended December 31, 2011, the company’s revenue rose 12.6%, to $432.0 million from $383.7 million a year earlier. Acquisitions were part of the reason for the gains. Stantec is also working on a number of new projects. Before one-time items, earnings rose 4.3%, to $24.3 million, or $0.53 a share, from $23.3 million, or $0.51 a share. Stantec continues to grow by acquisition. In 2011, it bought five companies. Together, these firms added 725 staff to Stantec’s workforce....

DUNDEE REIT $36.80 (Toronto symbol D.UN; TSINetwork Rating: Speculative) (416-365-3535; www.dundeereit.com; Shares outstanding: 66.3 million; Market cap: $2.4 billion; Dividend yield: 6.0%) owns and manages 18.9 million square feet of office, industrial and retail space. The trust has a 95.6% occupancy rate.

In the three months ended December 31, 2011, Dundee’s revenue jumped 73.2%, to $136.3 million from $78.7 million a year earlier. Most of the increase came from properties the trust recently purchased.

The best way to assess a real estate investment trust’s operating performance is to look at its cash flow, and Dundee’s cash flow rose 62.6% in the latest quarter, to $41.0 million from $25.2 million. Cash flow per unit rose 12.7%, to $0.62 from $0.55, due to more units outstanding (the trust issued new units to pay for the acquired properties).

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Constellation Software, $95.00, symbol CSU on Toronto (Shares outstanding: 17.5 million; Market cap: $1.7 billion; www.csisoftware.com), sells software to a range of public- and private-sector clients. The company has over 20,000 customers in over 30 countries. In the three months ended September 30, 2011, Constellation’s revenue rose 23.6%, to $202.3 million from $163.6 million. Excluding one-time items, the company earned $1.87 a share, up sharply from $1.06 a year earlier. The latest earnings also beat the consensus estimate of $1.47 a share. Constellation continues to make acquisitions. It just bought Capital Computer Associates, Inc. of Albany, New York, for an undisclosed sum. Capital sells software to New York State school boards....

DUNDEE REIT, $34.63, symbol D.UN on Toronto, owns and manages 18.9 million square feet of office, industrial and retail space. The real estate investment trust’s occupancy rate is 95.6%. In the three months ended December 31, 2011, Dundee’s revenue jumped 73.2%, to $136.3 million from $78.7 million a year earlier. Most of the increase came from properties the trust recently purchased. The best way to assess a real estate investment trust’s operating performance is to look at its cash flow, and Dundee’s cash flow rose 62.6% in the latest quarter, to $41.0 million from $25.2 million. Cash flow per unit rose 12.7%, to $0.62 from $0.55, due to more units outstanding (the trust issued new units to pay for the acquired properties)....

TUPPERWARE BRANDS CORP. $61 (www.tupperwarebrands.com) earned $273.3 million in 2011. That’s up 14.9% from $237.9 million in 2010. Earnings per share rose 19.6%, to $4.45 from $3.72, on fewer shares outstanding. Sales rose 12.4%, to $2.6 billion from $2.3 billion, thanks to improving demand for its plastic food containers and beauty products in fast-growing markets like South America and Asia; emerging markets now account for 58% of its total sales. The company also raised its quarterly dividend by 20.0%, to $0.36 a share from $0.30. The new annual rate of $1.44 yields 2.4%. Best Buy. ALLIANT ENERGY CORP. $43 (www.alliantenergy.com) plans to sell subsidiary RMT Inc., which specializes in wind- and solar-power projects. This business’s losses ballooned in 2011, mainly due to delays at a solar project in New Jersey. Alliant expects to record a charge of $0.10 to $0.14 a share in connection with the sale. Excluding RMT’s losses and other unusual items, the company expects to earn $2.75 to $3.05 a share in 2012. It earned $2.76 a share in 2011. Buy. BUCKEYE PARTNERS L.P. $60 (www.buckeye.com) has raised its quarterly distribution for the 31st consecutive quarter, to $1.0375 a unit from $1.025. The new annual rate of $4.15 yields 6.9%. However, its growth-by-acquisition strategy adds risk. Hold.