BCE Inc.

BANK OF NOVA SCOTIA, $52.94, Toronto symbol BNS, earned $1.1 billion in the three months ended July 31, 2010. That’s up 14.1% from $931 million a year earlier. Earnings per share rose 12.6%, to $0.98 from $0.87, on more shares outstanding. Despite the gain, the latest earnings fell short of the consensus estimate of $1.00 a share. The bank set aside less money to cover bad loans because of the improving economy; that was the main reason for the higher earnings. In the latest quarter, loan-loss provisions fell 50.2%, to $276 million from $554 million a year earlier. Earnings at Bank of Nova Scotia’s Canadian banking division rose 21%, to a record $604 million, due to stronger demand for loans and wealth-management services. Earnings at the international-banking business rose just 2%, to $317 million, mostly because the higher Canadian dollar hurt their contribution. Without the negative impact of exchange rates, earnings at this business would have risen 11%. Earnings at the capital-markets division fell 35% to $305 million, as volatile stock markets and concerns over European sovereign debt hurt trading volumes....

IMPERIAL OIL $39.55 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $33.5 billion; SI Rating: Average; Dividend yield: 1.1%) has formed a new joint venture with parent company ExxonMobil Corp. (New York symbol XOM) and BP plc (New York symbol BP). This new company will explore for oil and natural gas in the Beaufort Sea. Imperial and Exxon will each own a 25% stake in the venture, and BP will own 50%. Underwater exploration in the arctic is hugely expensive, so this joint venture will help all three partners lower their costs. Developing these offshore fields would also help Imperial with its plan to build a new pipeline that would pump gas from the Mackenzie Delta to Alberta. However, exploration will have to wait while regulators review offshore drilling safety standards in the wake of BP’s oil spill in the Gulf of Mexico....

BCE INC. $32 has raised its quarterly dividend for the fourth time in less than two years. The new annual rate of $1.83 a share, up 5.2% from $1.74, yields 5.7%. Best Buy. MOLSON COORS CANADA INC. $47 earned $1.25 a share in the second quarter of 2010. That’s up 12.6% from $1.11 a share a year earlier (all amounts except share price in U.S. dollars). The higher earnings mainly resulted from ongoing cost cuts, as well as savings from its MillerCoors brewing joint venture in the U.S. Sales rose 10.5%, to $1.3 billion from $1.2 billion. Best Buy. PENGROWTH ENERGY TRUST $10 reported that in the three months ended June 30, 2010, its combined oil and natural-gas production fell 8.1% from a year earlier. That’s because unusually wet weather in western Canada hindered its drilling operations. However, the average selling price for its oil and gas rose 9.0%. That pushed up its cash flow by 12.1% in the quarter. Buy.

BCE faces strong competition from cable companies and new wireless providers. However, a major cost-cutting drive has freed up cash for new investments in its networks. These savings also give BCE room for dividend increases, share buybacks and other moves that can pay off for investors. BCE INC. $32 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 763.0 million; Market cap: $24.4 billion; Price-to-sales ratio: 1.4; Dividend yield: 5.4%; SI Rating: Above Average) is Canada’s largest provider of telephone, Internet and wireless services. The company’s main subsidiary, Bell Canada, has 6.8 million residential and business customers in Ontario and Quebec. BCE sells wireless services to 6.9 million subscribers across Canada. As well, it has 2.1 million high-speed Internet customers and 2.0 million satellite-TV subscribers....

TRANSALTA CORP. $20.17 (Toronto symbol TA; Shares outstanding: 218.8 million; Market cap: $4.4 billion; SI Rating: Average; Dividend yield: 5.8%) dropped 5% following the federal government’s June 23 announcement that it plans to phase out coal-fired power plants by around 2025. TransAlta uses coal to generate 57% of its power. Under the proposals, TransAlta would have to close its coal-fired plants when they reach 45 years of age or when their power-purchase contracts with provinces expire, whichever is later. The new rules would prevent TransAlta from extending the lives of these plants unless it can lower carbon emissions to the same level as natural-gas-fired plants. Ottawa’s plan is still in its early stages, and much could change before the new rules come into effect in 2011. Still, TransAlta feels it can replace some of its older plants with gas-fired facilities. It’s also developing new clean-coal and carbon-storage systems that would help it comply with the new standards....

CGI GROUP INC., $14.90, Toronto symbol GIB.A, has agreed to buy Stanley Inc. (New York symbol SXE). Founded in 1966 by U.S. Navy Rear Admiral Emory Stanley, Stanley Inc. provides computer-outsourcing services, mainly to military and civilian agencies of the U.S. government. CGI aims to close the deal later this year. CGI is paying roughly $1.07 billion U.S. for Stanley. That’s equal to 26% of CGI’s $4.3-billion (Canadian) market cap. On March 31, 2010, CGI held cash of $419.1 million, or $1.47 a share, so it will need additional funds to complete this purchase. However, its long-term debt of $274.5 million is a low 6% of its market cap, so it can comfortably afford to borrow most of the price. Adding Stanley will diversify CGI’s U.S. operations. Following the purchase, defense and intelligence customers will represent 55% of its customer base, while the remaining 45% will come from civilian customers. CGI will also gain access to Stanley’s high-quality clientele, which should give it high-potential cross-selling opportunities....

ENCANA CORP $32.40 (Toronto symbol ECA; Shares outstanding: 741.7 million; Market cap: $24.0 billion; SI Rating: Average; Dividend yield: 2.5%) took its present form on December 1, 2009. That’s when the old EnCana Corp. split itself into two separate companies. One is now called “Encana Corp.,” and focuses on unconventional natural gas. The other, Cenovus Energy Inc. (see below), specializes in oil-sands projects, oil refineries and conventional natural gas. If you assume the split occurred at the start of 2009, Encana’s earnings per share fell 22.2% in the three months ended March 31, 2010, to $0.56 from $0.72 a year earlier. (All amounts except share price in U.S. dollars.) These figures exclude several unusual items, such as gains on hedging contracts that Encana uses to lock in its selling price for natural gas. Cash flow per share declined 15.1%, to $1.57 from $1.85. Revenue fell 3.7%, to $3.5 billion from $3.7 billion....

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BCE INC. $30 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 767.2 million; Market cap: $23.0 billion; Price-to-sales ratio: 1.3; Dividend yield: 5.8%; SI Rating: Above Average) is buying back 20 million, or about 3%, of its outstanding shares this year. Share buybacks raise earnings per share and other per-share calculations. Buybacks like this typically occur in small amounts over a year. However, BCE recently bought four million shares at market prices from a private seller, instead of through a stock exchange. It will count these shares toward its target of 20 million. BCE is a buy.