bce

RBC CANADIAN DIVIDEND FUND $44.84 (RBC Mutual Funds, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-463-3863; Web site: www.royalbank.com. No load — deal directly with the bank) has 38.1% of its portfolio in financial-services stocks. It has a further 14.4% in energy stocks and 8.5% in consumer discretionary. The $9.6-billion RBC Canadian Dividend Fund’s top stock holdings are Royal Bank of Canada, Bank of Nova Scotia, Toronto-Dominion Bank, Manulife Financial, Canadian Imperial Bank of Commerce, TransCanada Corporation, Bank of Montreal, BCE Inc. and Power Corporation. Over the last five years, RBC Canadian Dividend Fund has posted a 14.9% annual rate of return. That’s less than the S&P/TSX’s gain of 18.3% over the same period....

BCE INC. $36.29, Toronto symbol BCE, is trading nearly 15% below the $42.75-a-share takeover offer it accepted in July 2007. This is partly because several institutional holders of BCE bonds have launched a class-action lawsuit to oppose it. BCE’s plan to take on more debt has hurt the value of their holdings. If the suit succeeds and forces BCE to compensate the bondholders for their losses, the Ontario Teachers’ Pension and its partners may decide to abandon the takeover. Liquidity problems in the debt markets could also scuttle the takeover, since that could hurt the ability of the takeover consortium to issue new bonds. This group has also lined up loans from several banks, but recent writedowns of U.S. subprime mortgages have raised fears that these banks may withdraw or cut their involvement. However, lower interest rates will cut the buyers’ costs. The drop in BCE suggests that the takeover is unlikely to go through. But at the current reduced price, BCE is once again an attractive buy for income and growth....

AGRIUM INC. $72.10, Toronto symbol AGU, has gained nearly 25% in the past month, partly due to a new energy bill in the United States that mandates a five-fold increase in the production of biofuels by 2022. As a major supplier of fertilizers, Agrium should profit from higher production of crops, such as corn, for use in ethanol production. The new bill may also help Agrium re-open its plant in Kenai, Alaska, which it recently shut down due to a lack of natural gas supplies. Agrium is studying a plan to convert coal into natural gas, and could receive subsidies that would offset the costs of a new facility. However, relying on the largely politically inspired ethanol boom for growth adds to Agrium’s risk. The company is also vulnerable to rising natural gas prices....

BELL ALIANT REGIONAL COMMUNICATIONS INCOME FUND $30 (Toronto symbol BA.UN; Conservative Growth Portfolio, Utilities sector; Units outstanding: 127.1 million; Market cap: $3.8 billion; SI Rating: Above average) transferred the bulk of its wireless business to BCE Inc. as part of the deal that created the trust. Without these operations, the fund now aims to spur growth by expanding the availability and capacity of its high-speed Internet service. Bell Aliant now plans to launch high-speed Internet service in 24 communities in Nova Scotia in 2008. It also plans to add more wireless high-speed access spots in urban areas. Expanding high-speed availability will help Bell Aliant hang on to customers, and encourage them to buy more services such as digital TV. New revenue streams will also help it keep paying monthly distributions of $0.235 a unit (9.4% yield)....

BELL ALIANT REGIONAL COMMUNICATIONS INCOME FUND $28.75 (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. As part of the deal that created Bell Aliant, the fund transferred the bulk of its wireless business to BCE. Without these operations, the fund now aims to spur growth by expanding the availability and capacity of its high-speed Internet service. Just 20% of Bell Aliant’s customers use its high-speed Internet service, so there’s plenty of room to grow. In the three months ended September 30, 2007, Bell Aliant earned $0.48 a unit from continuing operations in its second quarter. The fund took its present form on July 7, 2006, so it did not report earnings for the year-earlier quarter. But revenue on a pro forma basis, which assumes Bell Aliant began operations at the start of 2006, grew 1.6%, to $837.9 million from $825.1 million....

ISHARES DIVIDEND INDEX FUND $24.12 (Toronto symbol XDV; buy or sell through a broker) began trading in December, 2005. The fund currently holds the 30 highest yielding Canadian stocks. These stocks are included in the index based on their dividend growth, yield and average payout ratio. The weight of any one stock in the fund is limited to 10% of the fund’s assets. Its MER is 0.50%. iShares Dividend Index Fund now yields 2.9%. The fund’s top holdings are CIBC at 6.8%; Manitoba Telecom at 6.4%; Bank of Montreal, 5.4%; TD Bank, 4.7%; Teck Cominco, 4.7%; Russel Metals, 4.4%; BCE Inc., 4.2%; IGM Financial, 4.0%; Laurentian Bank, 3.9%; and Magna International, 3.9%....

LOBLAW COMPANIES LTD. $45 (Toronto symbol L; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 274.2 million; Market cap: $12.3 billion; SI Rating: Above average) offered discounts on purchases over $100 in the week before Thanksgiving. The company hopes promotions like this will help it compete with Wal-Mart’s new low-cost supermarkets. In the short term, however, the plan will hurt Loblaw’s profit margins. Loblaw is still a hold. BOMBARDIER INC. (Toronto symbols BBD.A $6.01 and BBD.B $5.99; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.7 billion; Market cap: $10.2 billion; SI Rating: Extra risk) recently recommended that airlines ground older models of one of its planes, due to possible problems with their landing gear. About 90% of these planes are now back in service....

BELL ALIANT REGIONAL COMMUNICATIONS INCOME FUND $32 (Toronto symbol BA.UN; Conservative Growth Portfolio, Utilities sector; Units outstanding: 130.8 million; Market cap: $4.2 billion; SI Rating: Above average) is the main provider of telephone services in Atlantic Canada. It also serves rural parts of Ontario and Quebec. BCE Inc. controls 43.4% of Bell Aliant. As part of the deal that created Bell Aliant, the fund transferred the bulk of its wireless business to BCE. Without these operations, the fund now aims to spur growth by expanding the availability and capacity of its high-speed Internet service. Just 20% of Bell Aliant’s customers use its high-speed Internet service, so there’s plenty of room to grow....

TELUS CORP. (Toronto symbols T $56 and T.A $54; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 331.7 million; Market cap: $18.5 billion; SI Rating: Above average) provides local and long distance telephone service in British Columbia, Alberta and parts of Quebec, and wireless service across Canada. A big part of the company’s success in the past few years is its wireless operations, which now account for 40% of its total revenue. Telus prefers to focus on long-term customers, which cuts the need for expensive promotions such as free phones. That has helped keep its wireless profit margins high compared to its main competitors (BCE and Rogers). Telus also tends to hang on to its customers longer....

BCE Inc. is the subject of a $42.75-a-share takeover offer. We feel BCE shareholders should vote in favour of the offer at a special meeting on September 21, 2007. That way, you’ll get the full amount without paying brokerage fees. We think most investors should hold some phone stocks as part of the Utilities sector component of a well-balanced portfolio....