BCE Inc.

TRANSCONTINENTAL INC. $13.85, Toronto symbol TCL.A, earned $30.3 million in its third fiscal quarter ended July 31, 2008, up 6.7% from $28.4 million a year earlier. Per-share earnings rose 11.8%, to $0.38 from $0.34 on fewer shares outstanding. These figures exclude unusual items. Revenue rose 6.1%, to $584.9 million from $551.1 million. If you exclude the negative impact of the higher Canadian dollar on Transcontinental’s U.S. and Mexican operations, revenue in the quarter would have grown 8%. Transcontinental’s recent investments in new printing presses should continue to keep its costs low. The company’s expertise and flexibility is also helping it win new printing contracts. For example, it recently started to print flyers for Shoppers Drug Mart in a deal worth $25 million a year. Transcontinental is a buy....

BCE INC. $40 (Toronto symbol BCE, Conservative Growth Portfolio, Utilities sector; Shares outstanding: 805.8 million; Market cap: $32.2 billion; SI Rating: Above average) plans to cut its workforce by 6% and simplify its management structure. This will cost BCE $250 million, but should save it $300 million a year. In the three months ended June 30, 2008, BCE earned $425 million or $0.53 a share before one-time items. The consortium headed by the Ontario Teachers’ Pension Plan now aims to complete its $42.75-a-share takeover of BCE by December 11, 2008. Even if the deal falls through, the savings from this latest restructuring will help BCE compete with new entrants in the wireless market. BCE is still a buy.

GENNUM CORP. $10 (Toronto symbol GND; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 35.6 million; Market cap: $356.0 million; SI Rating: Above average) has acquired ASIC Architect Inc., a California-based developer of products for highspeed computer networks. The $1.5 million purchase price is equal to 25% of the $5.9 million or $0.17 a share that Gennum earned in its second fiscal quarter ended May 31, 2008 (all amounts except share price and market cap in U.S. dollars). The acquisition should help Gennum take advantage of rising demand for high-speed data communications equipment. Gennum is a buy. PETRO-CANADA $47 (Toronto symbol PCA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 484.4 million; Market cap: $22.8 billion; SI Rating: Average) continues to profit from high energy prices, which offset lower production from its offshore operations in Eastern Canada. In the three months ended June 30, 2008, earnings rose 46.0% to $2.38 a share from $1.63 a year earlier. These figures exclude unusual items. Cash flow per share jumped 49.3%, to $4.09 from $2.74. Revenue grew 38.2%, to $7.6 billion from $5.5 billion....

BCE INC. $39 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 805.3 million; Market cap: $31.4 billion; SI Rating: Above average) now aims to complete its sale to a group of private investors headed by the Ontario Teachers’ Pension Plan by December 11, 2008. The consortium will still pay $42.75 a share, but BCE has agreed to stop paying dividends to its common shareholders. Suspending dividends will save BCE about $900 million, and make it easier for BCE’s buyers to secure the funds from lenders they need to complete the acquisition. The stock continues to trade about 9% below the offer price. That’s because the recent liquidity problems in the credit markets limit demand for new bonds, and could prompt the lenders to break...

One of our recommended Canadian income trusts is BELL ALIANT REGIONAL COMMUNICATIONS INCOME FUND $28 (Toronto symbol BA.UN; Conservative Growth Portfolio, Utilities sector; Units outstanding: 127 million; Market cap: $3.7 billion; SI Rating: Above average). Bell Aliant is the main provider of telephone services in Atlantic Canada. It also serves rural areas of Ontario and Quebec. BCE Inc. controls about 45% of Bell Aliant. As part of the deal that created the fund in July 2006, Bell Aliant transferred most of its wireless operations to BCE. Without these operations, Bell Aliant has focused on its other growth areas, such as high-speed Internet access. In the first quarter of 2008, a 14.6% rise in high-speed Internet subscribers helped expand Bell Aliant’s overall Internet revenue by 9.8% from a year earlier. Part of that increase was from the recent purchase of the publicly owned telephone system in Kenora, Ontario. Internet services now account for 11% of Bell Aliant’s total revenue....

BCE Inc. recently won a legal ruling against a lawsuit launched by its bondholders to block its $42.75-a-share takeover by a consortium led by the Ontario Teachers’ Pension Plan. BCE has also agreed to alter some of the terms to help speed up the takeover. If the buyout goes through, many of BCE’s investors will want to re-invest their proceeds in other high-yielding telecom stocks. Here are three we see as buys. The influx of former BCE investors should also help push up their stock prices....

BCE INC. $39.25, Toronto symbol BCE, gained $4 last Friday after it agreed to stop paying common share dividends as part of a new deal with the consortium headed by the Ontario Teachers’ Pension Plan that plans to buy BCE. The consortium will still pay $42.75 a share for BCE, and aims to close the transaction by December 11, 2008. However, suspending the dividend will save the company about $900 million, and make it easier for the consortium to secure the roughly $35 billion from lenders they need to complete the acquisition. The consortium has also agreed to pay BCE $1.2 billion if it backs out of the deal, up 20% from the original break-up fee of $1 billion. BCE is still a buy....

BCE INC. $35.72 (Toronto symbol BCE; SI Rating: Above-Average) has deferred declaring its second-quarter quarter common share dividend of $0.365 a share. That will save the company $294 million. BCE feels that holding on to the cash will make the $42.75-a-share takeover price more attractive to the buyers. The buyers may wind up paying less for BCE in the wake of tighter bank lending and lower stock markets. But if the dividend deferral pushes up the ultimate price, and you hold your shares outside an RRSP, you will wind up better off — the tax rate on the capital gains you’ll realize on the takeover is less than the tax you would have paid on the dividend....

BELL ALIANT REGIONAL COMMUNICATIONS INCOME FUND $28.28 (Toronto symbol BA.UN: SI Rating: Above average) is the main provider of telephone services in Atlantic Canada. It also serves rural parts of Ontario and Quebec. In the three months ended March 31, 2008, Bell Aliant’s earnings fell 25.9%, to $0.40 a unit from $0.54 a year earlier. That’s mainly due to additional depreciation expenses after an acquisition, plus a writedown of goodwill. However, cash flow per unit rose 11.0%, to $0.91 from $0.82. Revenue grew 1.6%, to $865.4 million from $851.4 million. Bell Aliant pays a regular monthly distribution of $0.2417 a unit, which gives it an annual yield of 10.3%. It distributed 79% of its cash flow to its investors in the latest quarter....

ISHARES CDN LARGECAP 60 INDEX FUND $83.94 (Toronto symbol XIU; buy or sell through a broker) (formerly called iUnits S&P/TSX 60 Index Participation Fund) is a good low-fee way to buy the top stocks on the TSX. The units hold a basket of stocks that represent the S&P/TSX 60 Index. The index is made up of the 60 largest and most heavily traded stocks on the TSX. Expenses on the units are just 0.17% of assets. Most of the 60 stocks in the index are good quality companies. However, to meet the requirement that all sectors are represented, the index holds a few firms we wouldn’t include, such as Biovail Corp. The index’s top holdings are: Potash Corporation, 6.2%; EnCana Corporation, 5.9%; Royal Bank, 5.2%; Research in Motion, 5.0%; Suncor Energy, 4.6%; Canadian Natural Resources, 4.6%; Manulife Financial, 4.5%; TD Bank, 4.4%; Bank of Nova Scotia, 3.9%; Barrick Gold, 3.4%; Goldcorp, 2.8%; BCE Inc., 2.4%; Petro-Canada, 2.3%; Canadian Oil Sands Trust, 2.2%; and Sun Life Financial, 2.0%. The shares trade on the TSX, just like stocks. Prices are quoted daily in newspaper stock tables. You’ll have to pay brokerage commissions to buy and sell the units, although you’ll quickly make that back by paying lower management fees....