bce

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....

We display a price-to-sales or p/s ratio with every stock we cover in our newsletters, including our flagship publication, The Successful Investor. Price-to-sales is the ratio you get when you compare a stock’s price to its sales per share (you get sales per share by dividing total annual sales by the number of outstanding shares). ...

We designed our Successful Investor ratings (Highest Quality, Above Average, Average and Extra Risk) to help you quickly and easily identify the best investments for long term profits. These stocks have the asset size and investment quality to weather market downturns and changing industry conditions. You’ll find our rating next to each stock we recommend in our newsletters — including the safety-conscious stocks we recommend in Canadian Wealth Advisor, our newsletter for lower-risk investing. Here are three of the factors we consider when we assign a rating to a stock....

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.

EMERA INC., $24.56, Toronto symbol EMA, owns Nova Scotia Power Inc., which is Nova Scotia’s main electrical-power supplier. Nova Scotia Power supplies 94% of Emera’s revenue. The remaining 6% comes from investments in power companies in the U.S. and the Caribbean. This week, Nova Scotia Power and U.S.-based NewPage Corp. agreed to build a new biomass power plant at NewPage’s Port Hawkesbury paper mill in northern Nova Scotia. Biomass power plants generate electricity by burning plant materials and wood waste. This new facility should start operating by the end of 2012. It will then supply 3% of Nova Scotia’s power needs. Under the deal, Nova Scotia Power will invest $200 million in the new plant, including $80 million to buy an existing wood-burning generator. Most of the remaining $120 million will go toward building a second generator. NewPage will build and operate the biomass plant. It will also supply the fuel....

BCE INC. $30.07 (Toronto symbol BCE; Shares outstanding: 765.2 million; Market cap: $23.0 billion; SI Rating: Above Average; Dividend yield: 5.8%) provides telephone and Internet services in Ontario and Quebec. It also sells wireless and satellite-TV services across Canada. In 2009, BCE’s revenue rose 0.4%, to $17.74 billion from $17.66 billion in the prior year. Earnings before one-time items rose 6.5%, to $1.9 billion from $1.8 billion in the prior year. Per-share earnings rose 11.1%, to $2.50 from $2.25, on fewer shares outstanding. The Canadian wireless market is highly competitive. However, last year BCE bought the “The Source,” a 756-store home-electronics chain. That gives BCE a ready outlet to sell its products and services. As well, the company’s Virgin Mobile discount cellphone service is helping it attract younger, more cost-conscious users....

BCE is using its strong cash flow to expand and improve its wireless and high-speed Internet networks. That will fuel the company’s long-term growth. It will also let BCE keep adding services, buying back shares and paying (and possibly raising) its high dividend. BCE INC. $30.07 (Toronto symbol BCE; Shares outstanding: 765.2 million; Market cap: $23.0 billion; SI Rating: Above Average; Dividend yield: 5.8%) provides telephone and Internet services in Ontario and Quebec. It also sells wireless and satellite-TV services across Canada. In 2009, BCE’s revenue rose 0.4%, to $17.74 billion from $17.66 billion in the prior year. Earnings before one-time items rose 6.5%, to $1.9 billion from $1.8 billion in the prior year. Per-share earnings rose 11.1%, to $2.50 from $2.25, on fewer shares outstanding....

BELL ALIANT REGIONAL COMMUNICATIONS INCOME FUND $25.47 (Toronto symbol BA.UN: Units outstanding: 127.3 million; Market cap: $3.2 billion; SI Rating: Above Average; Yield: 11.4%) provides traditional land-line phone service in Atlantic Canada and rural parts of Ontario and Quebec. The trust will revert to regular corporate status before January 1, 2011. This will force it to pay income taxes, so its yield of 11.4% will shrink, even after allowing for the dividend tax credit. But its yield will stay well above BCE’s. As part of the 2006 deal that created the trust, Bell Aliant transferred its wireless operations to BCE (which owns 45% of Bell Aliant). This cut into Bell Aliant’s growth....

Brookfield Asset Management, $26.37, symbol BAM.A on Toronto (Shares outstanding: 572.9 million; Market cap: $15.1 billion), is a holding company that mainly focuses on real estate, infrastructure and power generation. Its holdings include interests in Brookfield Renewable Power Fund and BPO Properties, which owns, develops and manages office buildings. Brookfield Asset Management also holds resource investments, including Norbord. Brookfield Asset Management has a complex holding company structure that could make it difficult to spot problems, should they arise. We see the stock as okay to hold, but don’t recommend it for new buying. RioCan, $18.56, symbol REI.UN on Toronto (Units outstanding: 242.0 million; Market cap: $4.5 billion) – see above – is a buy for income and growth....

BELL ALIANT REGIONAL COMMUNICATIONS INCOME FUND $25.30 (Toronto symbol BA.UN: Units outstanding: 127.3 million; Market cap: $3.2 billion; SI Rating: Above Average; Dividend yield: 11.4%) will convert to a regular, dividend-paying corporation before Ottawa starts taxing income trusts on January 1, 2011. The conversion will force Bell Aliant to pay income taxes. To offset this cost, the trust will cut its current monthly distributions of $0.2417 a unit, which now yield 11.4%. Still, it’s likely that the payout will remain high compared to similar telephone utilities. As well, the conversion may prompt BCE, which owns 45% of Bell Aliant, to buy the remaining units. While that’s not reason enough to buy, the possibility of a takeover adds to Bell Aliant’s appeal. Meanwhile, Bell Aliant earned $373.0 million in 2009. That’s up 10.8% from $336.6 million in 2008. Earnings per unit rose 11.5%, to $2.33 from $2.09, on more units outstanding. Cash flow per unit rose 8.0%, to $3.39 from $3.14. Revenue fell 2.2%, to $3.17 billion from $3.25 billion. Cost savings offset lower revenue from a 5% drop in local telephone subscribers....