atco
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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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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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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ATCO and its main subsidiary, Canadian Utilities, have two major pluses that help them cut their risk: both get around two-thirds of their earnings from regulated power and gas utilities, and both have many clients under long-term contracts. The resulting stable revenue streams help them invest in new projects and raise their dividends. 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%....
ATCO LTD. (Toronto symbols ACO.X [class I non-voting] $61 and ACO.Y [class II voting] $60; Income Portfolio, Utilities sector; Shares outstanding: 58.2 million; Market cap: $3.4 billion; Price-to-sales ratio: 0.9; Dividend yield: 1.9%; TSINetwork Rating: Above Average; www.atco.com) is a holding company. Its main subsidiary is 52.7%-owned Canadian Utilities (see page 1).
ATCO has four main divisions: Utilities (which distributes electricity and natural gas); Energy (which operates power plants); its Australian business (which operates power plants and distributes natural gas in Australia); and Structures & Logistics (which serves construction companies and firms that explore for oil and natural gas). ATCO owns 75.5% of the Structures & Logistics division; Canadian Utilities owns the remaining 24.5%.
The company also owns several smaller businesses. For example, ATCO I-Tek manages computer networks, billing and payment processing for a wide variety of businesses. Another subsidiary, ASHCOR Technologies Ltd., makes fly ash from the residue from ATCO’s coal-fired power plants. Adding fly ash to cement makes it more durable.
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ATCO has four main divisions: Utilities (which distributes electricity and natural gas); Energy (which operates power plants); its Australian business (which operates power plants and distributes natural gas in Australia); and Structures & Logistics (which serves construction companies and firms that explore for oil and natural gas). ATCO owns 75.5% of the Structures & Logistics division; Canadian Utilities owns the remaining 24.5%.
The company also owns several smaller businesses. For example, ATCO I-Tek manages computer networks, billing and payment processing for a wide variety of businesses. Another subsidiary, ASHCOR Technologies Ltd., makes fly ash from the residue from ATCO’s coal-fired power plants. Adding fly ash to cement makes it more durable.
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CANADIAN UTILITIES LTD. (Toronto symbols CU [class A non-voting] $60 and CU.X [class B voting] $61; Income Portfolio, Utilities sector; Shares outstanding: 127.6 million; Market cap: $7.7 billion; Price-to-sales ratio: 2.6; Dividend yield: 2.7%; 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. ATCO Ltd. (see page 2) owns 52.7% of the company.
Canadian Utilities’ revenue fell 1.0%, from $2.43 billion in 2006 to $2.40 billion in 2007, but rose 15.6%, to $2.8 billion, in 2008. Lower power rates in Alberta cut revenue by 7.0%, to $2.6 billion, in 2009. However, revenue rose 2.8% in 2010, to $2.7 billion, because the company started up a new power plant in Australia. Earnings rose 37.6%, from $320.5 million, or $2.54 a share, in 2006 to $440.9 million, or $3.50 a share, in 2010.
Canadian Utilities continues to expand in Australia. In July 2011, it paid $1.1 billion for Western Australia Gas Networks, which distributes natural gas to over 620,000 customers in the city of Perth. The company’s Australian operations now supply 8% of its revenue and 10% of its earnings.
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Canadian Utilities’ revenue fell 1.0%, from $2.43 billion in 2006 to $2.40 billion in 2007, but rose 15.6%, to $2.8 billion, in 2008. Lower power rates in Alberta cut revenue by 7.0%, to $2.6 billion, in 2009. However, revenue rose 2.8% in 2010, to $2.7 billion, because the company started up a new power plant in Australia. Earnings rose 37.6%, from $320.5 million, or $2.54 a share, in 2006 to $440.9 million, or $3.50 a share, in 2010.
Canadian Utilities continues to expand in Australia. In July 2011, it paid $1.1 billion for Western Australia Gas Networks, which distributes natural gas to over 620,000 customers in the city of Perth. The company’s Australian operations now supply 8% of its revenue and 10% of its earnings.
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We’ve long held a high opinion of Canadian Utilities, because the company’s regulated power plants and natural-gas distribution businesses give it steady cash flow. That gives the stock long-term stability and helps it maintain its dividend. You can also profit from Canadian Utilities through ATCO, its parent company. ATCO’s holding-company discount lets you buy Canadian Utilities, and get ATCO’s other businesses for nothing. In addition, ATCO is working to unlock its value by simplifying its complex operating structure. ATCO has risen 61% since we first recommended it in September 2009. Canadian Utilities is up 62% during the same period....
TORONTO-DOMINION BANK, $71.10, Toronto symbol TD, has agreed to buy MBNA’s Canadian credit card operations from Bank of America (New York symbol BAC). This purchase will add 1.8 million customers to TD’s roughly 4.0 million credit-card accounts. MBNA is also the largest issuer of MasterCard cards in Canada, which will diversify TD’s Visa cards. TD will pay $8.5 billion for MBNA’s Canadian credit-card operations when the deal closes, probably early next year. To put that in context, TD earned $5.2 billion, or $5.77 a share, in its 2010 fiscal year, which ended October 31, 2010....
When picking high dividend stocks, we continue to recommend that you look beyond yield (dividend rate divided by share price). Instead, focus on high-quality companies with long histories of rising payouts, such as these four utilities (including Canadian Utilities, see box on page 74). Their steady cash flows are helping them maintain or raise their dividends, and invest in new growth projects. FORTIS INC. $32 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 196.8 million; Market cap: $6.3 billion; Price-to-sales ratio: 1.5; Dividend yield: 3.6%; TSINetwork Rating: Above Average; www.fortisinc.com) is the main supplier of electrical power in Newfoundland and Prince Edward Island. It also operates power plants in other parts of Canada, as well as the U.S., Belize and the Cayman Islands. In addition, Fortis operates hotels and other businesses in Canada. The company has been working to lower its reliance on Atlantic Canada. In May 2004, it bought regulated electrical utilities in Alberta and B.C. for $1.5 billion in cash and stock. In May 2007, it paid $3.7 billion for the regulated gas-distribution business of Terasen Inc. (now called FortisBC Energy), which has 940,000 customers in B.C. Fortis issued $1.15 billion of shares to help pay for this purchase....
CGI GROUP INC., $22.99, Toronto symbol GIB.A, has gained 27.1% since we named it our “#1 Stock of the Year” for 2011. CGI is Canada’s largest provider of computer-outsourcing services. The company’s services can automate certain routine functions, such as accounting and buying supplies. That makes its clients more efficient, and lets them focus on their main businesses. The company’s strong reputation continues to help it win new contracts. As well, CGI is benefiting as governments and businesses look for ways to cut their computing costs....
IMPERIAL OIL LTD. $46 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $39.0 billion; Price-to-sales ratio: 1.5; Dividend yield: 1.0%; TSINetwork Rating: Average; www.imperialoil.ca) now estimates that its Kearl oil-sands project will cost $10.9 billion. That’s 36% higher than its earlier estimate of $8 billion. The company owns 71% of Kearl, and Exxon-Mobil Corp. (New York symbol XOM) owns the remaining 29%. ExxonMobil also owns 69.9% of Imperial’s shares. Imperial has changed the original design of this project to make it easier to expand in the future, and to respond to new environmental regulations. These changes were the main reason for the higher costs....