bce

MANITOBA TELECOM SERVICES INC. $29 (Toronto symbol MBT; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 78.5 million; Market cap: $2.3 billion; Price-to-sales ratio: 1.4; Dividend yield: 4.5%; TSINetwork Rating: Average; www.mtsallstream.com) gets 60% of its revenue from its MTS division, which has 1.3 million telephone, wireless and TV customers in Manitoba. The other 40% comes from Allstream, which sells phone and Internet services to businesses across Canada. The company recently completed a strategic review of its operations. As a result, it now plans to cut 25% of Allstream’s workforce and reduce the subsidiary’s capital spending by 20% to 30% in 2015. These moves should save Manitoba Telecom $50 million annually by the end of 2016. In addition, the company will contribute $120 million to its underfunded employees’ pension plan, eliminating the need for additional payments over the next two years. It has also cut its dividend by 23.5%: the new annual rate of $1.30 a share yields 4.5%....

BCE meets our “buy” criteria for blue chip stocks as it adds new services, speeds up its network and keeps its dividend safe and rising.

ISHARES CANADIAN SELECT DIVIDEND INDEX ETF $23.07 (Toronto symbol XDV; buy or sell through brokers; ca.ishares.com) holds 30 of the highestyielding Canadian stocks. Its selections are based on dividend growth, yield and payout ratio. The weight of any one stock is limited to 10% of the ETF’s assets. The fund’s MER is 0.55%, and it yields 4.5%. The fund’s top holdings are CIBC, 8.5%; Bank of Montreal, 6.3%; Royal Bank, 6.3%; Bank of Nova Scotia, 5.4%; BCE, 5.3%; Laurentian Bank of Canada, 4.4%; IGM Financial, 4.3%; TD Bank, 4.1%; National Bank, 4.1%; Rogers Communications, 4.1%; and TransCanada Corp., 4.0%.

The ETF holds 53.7% of its assets in financial stocks. The top Canadian finance stocks have sound prospects, but 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 ETF $21.18 (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 0.18% of assets, and it yields 3.0%.

The index mostly consists of high-quality companies. However, it must ensure that all sectors are represented, so it holds a few we wouldn’t include. The index’s top holdings are Royal Bank, 7.9%; TD Bank, 7.1%; Valeant Pharmaceuticals, 6.6%; Bank of Nova Scotia, 5.6%; CN Railway, 4.2%; Suncor Energy, 3.6%; Enbridge, 3.6%; Bank of Montreal, 3.4%; BCE, 3.3%; Manulife Financial, 3.3%; Brookfield Asset Management, 2.8%; and Canadian Natural Resources, 2.6%.

iShares S&P/TSX 60 Index ETF is a buy.
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BCE INC. $52.91 (Toronto symbol BCE; Shares outstanding: 847.9 million; Market cap: $45.4 billion; TSINetwork Rating: Above Average; Dividend yield: 4.9%; www.bce.ca) continues to expand its Fibe TV and high-speed Internet networks.

BCE aims to increase Fibe speeds in Toronto to 1,000 megabits a second, or 5.7 times faster than its current top speed of 175 megabits. Faster networks will help BCE hang on to its current customers and compete with cable companies.

The company will spend $1.14 billion on these improvements, which will eventually reach 1.1 million Toronto homes and businesses. It will also speed up its Fibe networks in other cities in Ontario, Quebec and Atlantic Canada.

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Like Telus (see page 71), BCE and Manitoba Telecom are speeding up their networks to profit from demand for faster downloads—both through high-speed Internet and wirelessly. Both companies can easily afford to make these investments and maintain their dividends, but we feel BCE is the better choice right now. BCE INC. $55 (Toronto symbol BCE; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 841.9 million; Market cap: $46.3 billion; Price-to-sales ratio: 2.2; Dividend yield: 4.7%; TSINetwork Rating: Above Average; www.bce.ca) is Canada’s largest telephone provider, with 7.0 million customers in Ontario, Quebec and the Atlantic provinces. It also has 3.3 million highspeed Internet users and 2.7 million TV subscribers....

BCE INC. $52.91 (Toronto symbol BCE; Shares outstanding: 847.9 million; Market cap: $45.4 billion; TSINetwork Rating: Above Average; Dividend yield: 4.9%; www.bce.ca) continues to expand its Fibe TV and high-speed Internet networks. BCE aims to increase Fibe speeds in Toronto to 1,000 megabits a second, or 5.7 times faster than its current top speed of 175 megabits. Faster networks will help BCE hang on to its current customers and compete with cable companies. The company will spend $1.14 billion on these improvements, which will eventually reach 1.1 million Toronto homes and businesses. It will also speed up its Fibe networks in other cities in Ontario, Quebec and Atlantic Canada....

Exchange traded funds (ETFs) are set up to mirror the performance of a stock market index or sub-index. They hold a more or less fixed selection of securities that represent the holdings that go into the calculation of the index or sub-index. ETFs trade on stock exchanges, just like stocks. That’s different from mutual funds, which you can only buy at the end of the day at a price that reflects the fund’s value at the close of trading. Prices of ETFs are quoted in newspaper stock tables and online. You pay brokerage commissions to buy and sell them, but their low management fees give them a cost advantage over most mutual funds....

POTASH CORP. OF SASKATCHEWAN, $38.61, Toronto symbol POT, has offered to buy German fertilizer producer K+S AG for $8 billion U.S. That’s equal to 31% of its $32.2-billion (Canadian) market cap. The company sells most of its products to customers in the U.S. and Asia, so a takeover would greatly expand its presence in Europe. It would also gain access to K+S’s new Legacy potash mine in Saskatchewan, which will open in 2016. Merging Legacy’s operations with its five existing mines in Saskatchewan would give Potash Corp. an opportunity to cut costs. K+S will probably reject the offer, so Potash Corp. may have to raise its bid....

CANADIAN PACIFIC RAILWAY LTD. $208.00 (Toronto symbol CP; Shares outstanding: 164.0 million; Market cap: $34.0 billion; TSINetwork Rating: Average; Dividend yield: 0.7%; www.cpr.ca) fell recently in response to Teck Resources’ decision to shut down its six Western Canadian coal mines for about three weeks in the third quarter of 2015. The company is closing the mines because China’s slowing economic growth has hurt sales to steelmakers, while Australia’s rising coal production has depressed prices. CP has an exclusive contract to ship coal from five of Teck’s southeastern B.C. mines to the Port of Vancouver. In the first quarter of 2015, coal shipments from Teck and other miners accounted for 10% of the railroad’s revenue. The company is aggressively cutting costs and improving efficiency. Its plans include speeding up trains and reducing the amount of time they spend at terminals. These moves should help CP offset the lost revenue....