bce

CGI GROUP INC. $13 (Toronto symbol GIB.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 306 million; Market cap: $4 billion; Price-to-sales ratio: 1.0; SI Rating: Extra Risk) is Canada’s largest provider of computer-outsourcing services. CGI helps corporations and government agencies automate certain routine functions, such as accounting and buying supplies. This lets its clients focus on their main businesses, and improve their efficiency. The company has over 100 offices in 16 countries. Canada accounts for roughly 60% of its revenue, followed by the U.S. (35%) and Europe (5%). BCE Inc. (Toronto symbol BCE) is CGI’s largest client, supplying roughly 12% of its annual revenue. ...

BCE INC. $26.39 (Toronto symbol BCE; Shares outstanding: 767.2 million; Market cap: $20.2 billion; SI Rating: Above Average) has deeply disappointed many investors at times in the past, and they’ve resolved never to buy it again. The most recent disappointment came when the company sold itself to the Ontario Teachers’ Pension Plan for $42.75 a share, but the deal fell through because of problems with financing. That news prompted the stock to plunge from $38 to $22. These disappointments help explain why BCE is now as cheap as it is. However, the stock could redeem itself in investors’ eyes and come back into fashion....

FIDELITY CANADIAN LARGE CAP FUND $24.05 (CWA Rating: Conservative) (Fidelity Investments Canada, 483 Bay St., Suite 200, Toronto, Ont. M5G 2N7. 1-800-263-4077; Web site: www.fidelity.ca. Load fund — available from brokers) mainly invests in large firms, like those on the S&P/TSX 60 index, although it may also invest in mid-cap stocks. The $304.8-million Fidelity Canadian Large Cap Fund’s top holdings include Royal Bank of Canada, Suncor Energy, Manulife Financial, Canadian Natural Resources, Research in Motion, Goldcorp, Bank of Nova Scotia, BCE Inc., Canadian Imperial Bank of Commerce and TD Bank. The fund’s breakdown by industry includes: Financials (27.3%), Energy (18.0%), Materials (11.7%), Information Technology (9.0%), Consumer Discretionary (7.8%) and Industrials (7.5%)....

TELUS CORP. $33.31 (Toronto symbol T.A; Shares outstanding: 335.6 million; Market cap: $11.1 billion; SI Rating: Above Average) has purchased privately owned Black’s Photo Corp. Black’s owns and operates 113 stores that sell film, cameras and other photographic equipment. Telus plans to sell its wireless phones through these stores. As well, most cellphones now come with built-in cameras, so Black’s could help Telus tap into rising demand for digital-photo printing and other photo-related products and services. Telus paid $28 million for Black’s, which is just 11% of its second-quarter earnings of $244 million, or $0.77 a share....

ENCANA CORP., $63.52, Toronto symbol ECA, rose 7% on Friday after the company announced that it will split itself into two separate companies. One will keep the EnCana name, and will focus on unconventional natural gas. The other will operate as Cenovus Energy Inc., and will specialize in oil-sands projects, oil refineries and conventional natural gas. The new EnCana will account for about two-thirds of the company’s current production and reserves. Cenovus will account for the remaining third. EnCana had hoped to complete the split in early 2009, but the stock-market decline and tight credit markets would have made it difficult for the two new, smaller companies to raise capital to fund new projects. Now that conditions have improved, EnCana has decided to go ahead with the split....

TELUS CORP. (Toronto symbols T $34 and T.A $33; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 317.7 million; Market cap: $10.8 billion; Price-to-sales ratio: 1.1; SI Rating: Above Average) has purchased privately owned Black’s Photo Corp., which operates 113 stores that sell cameras, film and other photographic equipment. Telus plans to sell its cellphones and wireless services through Black’s. This looks like a good fit, as more consumers are using their cellphones to take pictures and videos. Adding Black’s will also help Telus compete with BCE, which recently bought consumer-electronics retailer The Source in an effort to attract new wireless customers. The company paid just $28 million for Black’s, which is equal to 11% of the $244 million, or $0.77 a share, that it earned in the three months ended June 30, 2009. Telus is a buy. The non-voting “A” shares are the better choice.

BCE INC. $27 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 767.2 million; Market cap: $20.7 billion; Price-to-sales ratio: 1.2; SI Rating: Above Average) has 7.2 million residential and business telephone customers in Ontario and Quebec. It also has 6.6 million wireless subscribers across Canada, and sells other services, including Internet access and satellite TV. BCE also owns 44% of Bell Aliant, which has 3.1 million telephone customers in Atlantic Canada and rural parts of Ontario and Quebec. Bell Aliant transferred most of its wireless business to BCE as part of the deal that created the trust in 2006. Last year, BCE began a major cost-cutting program in response to a high-profile takeover bid by a private group headed by the Ontario Teachers’ Pension Plan....

We rate BCE and Bell Aliant as “Above Average,” so they both have about the same risk level. Bell Aliant offers higher income, but BCE reinvests more of its cash flow. That reinvestment, plus its wider range of operations, gives the company better growth prospects. This makes BCE a better choice for new buying. BCE INC. $27 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 767.2 million; Market cap: $20.7 billion; Price-to-sales ratio: 1.2; SI Rating: Above Average) has 7.2 million residential and business telephone customers in Ontario and Quebec. It also has 6.6 million wireless subscribers across Canada, and sells other services, including Internet access and satellite TV. BCE also owns 44% of Bell Aliant, which has 3.1 million telephone customers in Atlantic Canada and rural parts of Ontario and Quebec. Bell Aliant transferred most of its wireless business to BCE as part of the deal that created the trust in 2006....

BCE INC. $26.76 (Toronto symbol BCE; Shares outstanding: 767.2 million; Market cap: $20.5 billion; SI Rating: Above Average) continues to lower its costs in the face of tough competition for new phone customers. Its current restructuring plan, which includes cutting jobs, relocating employees and selling surplus real estate, should save the company $400 million a year, starting in 2010. In the three months ended June 30, 2009, BCE’s per-share earnings rose 9.4%, to $0.58 from $0.53. This does not include costs related to the company’s restructuring. Revenue fell 2.1%, to $4.3 billion from $4.4 billion. The company continues to lose residential-phone customers to cable companies and wireless providers, but these losses are slowing. As well, the recession is weighing on BCE’s wireless operations, which signed up 45,000 new customers during the quarter, compared to 83,000 a year earlier. However, revenue from BCE’s satellite-TV services gained 9.3%, and high-speed Internet revenue rose 2.8%....

The dividend yield of the S&P/TSX Composite Index is now around 3%, up from 1% in the early part of this decade. This rise is partly because more companies are using their excess cash for dividends instead of buying back shares. This new focus on dividends is a good thing for investors. Dividends can contribute up to a third of an investor’s long-term returns, without even considering the effects of the dividend tax credit. As well, dividends are more dependable than capital gains as a source of investment income. Moreover, growing dividends help shield you from inflation. The recession has forced many companies to cut their dividends in order to conserve cash. The response is usually a big drop in the stock price....