BCE Inc.

BCE INC. $39.64, Toronto symbol BCE, is buying Astral Media Inc. (Toronto symbols ACM.A and ACM.B). Montreal-based Astral owns 22 TV stations, 84 radio stations and several pay TV and specialty channels, such as The Movie Network, Family Channel and Teletoon. It also owns billboards and sells other outdoor advertising services in Quebec, Ontario and B.C. The purchase price is $3.4 billion, including $380 million of Astral’s debt. BCE will pay roughly 75% of this cost in cash and 25% in common shares. To put this purchase in context, BCE earned $2.4 billion, or $3.13 a share, in 2011....

The arrival of new wireless providers has put pressure on Canada’s three main telecommunications companies (BCE, Telus and Rogers). To remain competitive, all three are offering subscribers better long-term deals. They are also making big investments in new wireless and high-speed Internet technologies. However, these moves are also dampening their profits. Still, demand for wireless services continues to rise, and we feel BCE’s broad geographic reach puts it in the best position to profit from that trend. The improving economy should also push up ad sales at its TV stations and other media businesses. Moreover, the company recently went through a significant restructuring. That will increase its long-term profits and give it more cash for dividends....

While BCE remains our favourite telco, we still have a high opinion of these three. Each faces unique challenges, and their concentration in certain regions adds risk. However, ongoing investments in their networks will continue to help them hang on to customers in the face of strong competition from cable companies and Internet-based phone services. That will also let them maintain or increase their dividends. TELUS CORP. (Toronto symbols T $57 and T.A $57; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 325.0 million; Market cap: $18.5 billion; Price-to-sales ratio: 1.8; Dividend yield: 4.3%; TSINetwork Rating: Above Average; www.telus.com) gets most of its growth from wireless services. Its 7.3 million subscribers across Canada now supply 52% of its earnings....

ISHARES S&P/TSX 60 INDEX FUND $17.91 (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 0.17% of assets.

Most of the stocks in the index are high-quality companies. However, as it must ensure that all sectors are represented, the fund holds a few we wouldn’t include.

The index’s top holdings are Royal Bank, 6.9%; TD Bank, 6.4%; Bank of Nova Scotia, 5.2%; Suncor Energy, 5.0%; Barrick Gold, 4.5%; Canadian Natural Resources, 4.0%; Potash Corp., 3.7%; Goldcorp, 3.6%; Bank of Montreal, 3.4%; CN Railway, 3.1%; BCE Inc., 2.9%; CIBC, 2.8%; Enbridge, 2.7%; TransCanada Corp., 2.7%; Cenovus Energy, 2.5%; and Manulife Financial, 1.9%.

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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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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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Gennum Corp., $13.52, symbol GND on Toronto (Shares outstanding: 35.6 million; Market cap: $481.7 million; www.gennum.com), has accepted a takeover offer from U.S.-based Semtech Corp. (Nasdaq symbol SMTC). Gennum designs electronic equipment and computer chips that let television broadcasters store, edit and transfer video signals without losing picture quality. It also designs chips that make computer networks faster. Semtech is offering $13.55 in cash for each Gennum share. That means the takeover price won’t drop as it might if Semtech was paying with shares instead. For example, Semtech shares could drop along with the market on any negative economic news, like a worsening of the European debt crisis....

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.

You may find that exchange-traded funds (ETFs) have a place in your portfolio. Unlike many other financial innovations, they don’t load you up with heavy management fees or tie you down with high redemption charges if you decide to withdraw. Instead, they give you a low-cost, flexible, convenient alternative to mutual funds. They have another advantage. Since shares are only added or removed when the underlying index changes, there’s a low turnover. That means you aren’t faced with the capital gains bills generated by the yearly distributions most mutual funds pay out to their unitholders....

Ottawa’s tax on income trust distributions took effect over a year ago, on January 1, 2011. Most trusts have already converted to corporations in response. Real estate investment trusts (REITs) are exempt, however, so they will remain as trusts. All but one of our trust recommendations have converted. We still like the long-term outlook for all these picks, and we see them as buys. All of our REIT recommendations remain buys, as well....