Broadridge Financial Solutions
BROADRIDGE FINANCIAL SOLUTIONS INC. $22 (New York symbol BR; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 125.0 million; Market cap: $2.8 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.7%; TSINetwork Rating: Average; www.broadridge.com) provides communication, processing and other services to the investment industry. These services help its customers cut costs and focus on their core businesses. Broadridge’s clients include 250 banks, 500 mutual-fund families and over 5,000 publicly traded companies. The company gets roughly 75% of its revenue from its Investor Communication Solutions division, which distributes proxy materials, including ballots, to investors in stocks and mutual funds. It then counts the votes. Broadridge’s ProxyEdge software helps centralize and simplify shareholder voting, particularly if a meeting involves multiple ballots. Broadridge mails and processes two-thirds of all proxy votes in the U.S....
Broadridge began trading on April 2, 2007, after former parent Automatic Data Processing Inc. (ADP) distributed its shares to its own stockholders as a special dividend, or “spinoff.” Like many spinoffs, Broadridge struggled at first. That’s partly because many ADP shareholders quickly sold their new shares. As well, institutional investors often ignore companies with smaller market caps (or the total value of shares outstanding). Broadridge later went into a deep slump over fears of big losses at its securities-clearing division during the 2008 credit crisis. However, as we’ve often pointed out, most spinoffs go on to produce above-average results over a period of years. Broadridge has rebounded strongly, partly because it decided to focus on helping companies communicate with their shareholders, which is less risky than securities clearing. Plus, it is using its improving earnings to buy other related firms and assets that will pay off for years to come....
CAMECO CORP., $37.60, symbol CCO on Toronto, plans to raise its quarterly dividend by 42.9% in 2011, to $0.10 a share from $0.07. The new rate will give the shares a yield of 1.1% based on today’s price. Cameco Corp. is still a buy. NEW GOLD INC., $10.17, symbol NGD on Toronto, has sold its 115 million shares of Australia-listed Beadell Resources Limited for $58 million. New Gold received these shares when it sold its Brazilian subsidiary, which held the Amapari property, in April 2010....
DEL MONTE FOODS CO., $18.83, New York symbol DLM, has accepted a $19.00-a-share takeover offer from a private equity group led by KKR & Co. (New York symbol KKR). The company has until Janury 8, 2011, to seek a better offer. If it can’t find another buyer, the deal with KKR should close by March 31, 2011. The stock is trading at 0.9% below the offer, which indicates that investors do not expect a higher offer....
DUNDEEWEALTH INC., $20.51, symbol DW on Toronto, has received a friendly takeover offer from Bank of Nova Scotia (Toronto symbol BNS), for the 82% of the company that the bank doesn’t already own. In September 2007, Bank of Nova Scotia paid $348 million for an 18% interest in DundeeWealth. The bank also gained a right of first refusal on any sale of the controlling interest in DundeeWealth. Bank of Nova Scotia is now offering 0.2497 of a Bank of Nova Scotia common share for each DundeeWealth common share. Plus, each DundeeWealth shareholder can choose to receive either $5.00 in cash or 0.2 of a $25.00, 3.70% five-year rate reset Bank of Nova Scotia preferred share for each DundeeWealth common share....
BROADRIDGE FINANCIAL SOLUTIONS INC. $20 (New York symbol BR; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 126.7 million; Market cap: $2.5 billion; Price-to-sales ratio: 1.2; Dividend yield: 3.0%; WSSF Rating: Average) has purchased privately held NewRiver Inc., which specializes in electronic forms that make it easier for financial companies to submit data to the Securities and Exchange Commission and other regulators. The $77.0 million price is equal to 34% of the $225.1 million, or $1.62 a share, that Broadridge earned in the fiscal year ended June 30, 2010. NewRiver already supplies electronic forms to Broadridge. This familiarity cuts the risk of an unpleasant surprise. Moreover, the purchase gives Broadridge access to NewRiver’s high-quality clientele, including mutual-fund companies, brokerage firms and pension-plan administrators....
INTACT FINANCIAL CORP. $44.85 (Toronto symbol IFC; SI Rating: Speculative) (416-341-1464; www.intactfc.com; Shares outstanding: 114.6 million; Market cap: $5.1 billion; Dividend yield: 3.0%) is Canada’s largest provider of property and casualty insurance, based on premiums. Its brands include Intact Insurance, Canada BrokerLink, belairdirect and Grey Power. Intact has two product lines: Its personal products, which contribute 70% of its premiums, include automobile and property insurance that Intact sells to individuals. Commercial products provide the remaining 30% of premiums, and include auto, property, liability, surety and specialty coverage that Intact mainly sells to small- and medium-sized businesses. In the three months ended June 30, 2010, Intact earned $1.04 a share. That’s up 67.7% from $0.62 a share a year earlier. Revenue rose 5.4%, to $1.32 billion from $1.25 billion....
BROADRIDGE FINANCIAL SOLUTIONS INC., $20.19, New York symbol BR, serves the investment industry in three main areas: investor communications, securities processing and transaction clearing. Broadridge mails and processes 70% of all proxy votes. In its 2010 fiscal year, which ended June 30, 2010, Broadridge earned $225.1 million. That’s up 0.9% from $223.1 million in fiscal 2009. Earnings per share rose 2.5%, to $1.62 from $1.58, on fewer shares outstanding. If you exclude unusual items, mostly income tax gains, Broadridge’s per-share earnings rose 3.3%, to $1.56 from $1.51. On that basis, the latest earnings still fell short of the consensus estimate of $1.57 a share....
RUSSEL METALS, $19.08, symbol RUS on Toronto, earned $0.31 a share before one-time items in the three months ended June 30, 2010. That’s a big improvement over the $0.10 a share it earned a year earlier. Revenue rose 9.4%, to $506.1 million from $462.5 million. The company distributed more steel during the quarter; that was the main reason for the higher revenue. As well, Russel continues to do a good job of controlling its costs and conserving cash: In early 2009, it cut 500 jobs (or 16.7% of its workforce), lowered executive pay by 10% and reduced its remaining employees’ hours. Those measures are helping push up its earnings. As well, the company cut its quarterly dividend by 44.4% last year, to $0.25 a share from $0.45. The stock now yields 5.2% a year, and the dividend now appears safe. Russel holds cash of $283.8 million, or $4.75 a share. Its $335.5 million of long-term debt is a reasonable 30.5% of its market cap....
When we’re picking stocks to recommend in our newsletters, including Wall Street Stock Forecaster, our publication that covers the U.S. markets, we like to see companies that benefit from steady revenue streams from high-quality assets, long-term contracts or other reliable sources. That’s because this type of revenue helps cut a stock’s risk. It also cuts its exposure to the ups and downs of the economic cycle.