Cenovus Energy Inc.

CENOVUS ENERGY $20.58 (Toronto symbol CVE; Shares outstanding: 824.6 million; Market cap: $17.4 billion; TSINetwork Rating: Average; Dividend yield: 5.2%; www.cenovus.com) has temporarily shut down its Foster Creek oil sands project in northern Alberta because forest fires in the area are hindering traffic on the main road to the site. Cenovus own 50% of Foster Creek, while U.S.-based ConocoPhillips (New York symbol COP) owns the other 50%. In the first quarter of 2015, Cenovus’s share of this project’s output was 68,000 barrels a day, or 31% of the company’s total oil production of 218,000 barrels. The fires have also forced other oil projects in Alberta to close. In all, these operations account for 9% of the province’s total production. This has pushed up the spot price of Western Canadian crude, which should help Cenovus offset the lost revenue....

A holding company is a company that owns all or a substantial part of a variety of different businesses. These businesses may be private companies, or publically traded. Holding companies may own all, or a majority or a minority, of companies in which they invest. The one thing most holding companies have in common is that they trade for less than the combined value of their holdings. This “holding company discount” is a well-known phenomenon in finance. It represents a special kind of hidden asset and potential profit for investors in holding companies. When holding companies sell assets or break themselves up into their constituent parts, much if not all of the discount may disappear. In other words, holding companies can usually sell their assets for fair market value, rather than at a discount. In addition, fair market value may turn out to be be more than analysts figured they were worth. Even without a break-up, buying a holding company at a discount to its asset value puts more assets to work for you for each dollar you invest....

BCE INC., $53.88, Toronto symbol BCE, reported higher-than-expected quarterly results this week. In the three months ended March 31, 2015, the company’s overall earnings rose 12.6%, to $705 million from $626 million a year earlier. But per-share profits gained just 3.7%, to $0.84 from $0.81, on more shares outstanding. These figures exclude unusual items, such as costs to integrate BCE’s November 2014 purchase of the 56% of Bell Aliant it didn’t already own. On that basis, the latest earnings beat the consensus estimate of $0.79 a share....

CENOVUS ENERGY INC. $22 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 824.5 million; Market cap: $18.1 billion; Price-to-sales ratio: 1.1; Dividend yield: 4.8%; TSINetwork Rating: Average) gets 35% of its revenue from its oil sands projects and conventional oil and gas wells in Western Canada.

Refining supplies the remaining 65% of Cenovus’s revenue. The company ships its oil to its 50%-owned refineries in Illinois and Texas. Phillips 66 (New York symbol PSX) owns the other 50% of these operations. These refineries help cut Cenovus’s exposure to falling oil prices, as cheaper crude cuts their operating costs.

Cenovus continues to expand its 50%-owned Christina Lake and Foster Creek oil sands operations; ConocoPhilips (New York symbol COP) owns the remaining 50%.

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While this split-share company dabbles in call options, investors would be better off buying the bank and oil stocks it holds separately.

Low oil and natural gas prices continue to hurt cash flow at Cenovus and Encana (see box). In response, both have issued shares to fund new projects and cut debt. The extra shares diluted existing investors’ holdings. However, they strengthened both companies’ balance sheets and put them in a better position to profit when oil and gas prices recover. CENOVUS ENERGY INC. $22 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 824.5 million; Market cap: $18.1 billion; Price-to-sales ratio: 1.1; Dividend yield: 4.8%; TSINetwork Rating: Average) gets 35% of its revenue from its oil sands projects and conventional oil and gas wells in Western Canada....

Big Bank Big Oil Split Corp. is a split-share company with two types of stock: capital shares ($9.32, symbol BBO on Toronto) and preferred shares ($10.21, symbol BBO.PR.A on Toronto).

The company holds shares of the biggest six Canadian banks, plus 10 large Canadian oil and gas and pipeline companies.

Split-share companies typically issue two classes of shares. Usually the capital shares get all or most of the capital gains and losses, as well as variable dividend income, and the preferred shares get a fixed amount of dividend income.

In the case of Big Bank Big Oil Split, the capital shares receive a monthly dividend of $0.05 a share ($0.60 annually), which gives them a 6.4% yield. The monthly dividend has been as high at $0.09, most recently in 2010.

The dividend income the company gets from its portfolio isn’t enough to pay capital and preferred share dividends and management expenses of 1.22%, in addition to providing a return for the capital shares. To make up the difference, the company has to make a profit by trading its portfolio. It also aims to raise its returns by writing call options on the portfolio’s securities.

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RESTAURANT BRANDS INTERNATIONAL INC., $52.21, Toronto symbol QSR, took its current form on December 12, 2014, as a result of Burger King Worldwide’s (old symbol BKW) acquisition of Tim Hortons Inc. (old symbol THI). Restaurant Brands is the world’s third-largest fast-food chain, after McDonald’s and Yum Brands, with 14,372 Burger King outlets and 4,671 Tim Hortons locations in 100 countries. In the three months ended December 31, 2014, the company lost $514.2 million, or $2.52 a share, compared to a profit of $66.8 million, or $0.19 (all amounts except share price in U.S. dollars). If you exclude merger costs and other unusual items, gross earnings before depreciation, interest and taxes rose 23.1%....

CENOVUS ENERGY $25.04 (Toronto symbol CVE; Shares outstanding: 757.1 million; Market cap: $19.4 billion; TSINetwork Rating: Average; Dividend yield: 4.3%; www.cenovus.com) has cut its capital spending plans for the second time in two months due to lower oil prices. The company now expects to spend $1.8 billion to $2.0 billion in 2015, down from $2.5 billion to $2.7 billion in its earlier plan (and down from an estimated $3.1 billion in 2014). As part of these cuts, it will suspend drilling for conventional oil in Alberta and Saskatchewan, and defer some oil sands work. Cenovus now expects its cash flow for the year to fall by roughly half, to $1.4 billion, or $1.85 a share. That could prompt the company to cut its $1.065-a-share dividend, which yields 4.3%. Cenovus’s dividend payments total $800 million a year....

CANADIAN NATIONAL RAILWAY CO., $83.72, Toronto symbol CNR, reported stronger-than-expected results this week. It also raised its dividend. In the three months ended December 31, 2014, CN’s revenue rose 16.8%, to $3.2 billion from $2.7 billion a year earlier. That beat the consensus forecast of $3.1 billion. The company saw higher revenue in all of its freight categories: metals and minerals (up 34.4%); petroleum and chemicals (up 20.5%); automotive (up 17.8%); grain and fertilizers (up 17.6%); forest products (up 10.6%); consumer and industrial goods (up 9.5%); and coal (up 7.5%)....