cn rail
When you learn more about stock market investment, you’ll realize there are two main ways a company can distribute its profits to shareholders. It can buy back its own shares, or it can pay dividends. Both dividends and buybacks pay off for investors. Here are 3 reasons why:
- A company boosts its per-share profit by buying back its shares back, because profits get divided among fewer shares.
- Boosting per-share profits can also push up share prices. Plus, buybacks let you defer taxes on those capital gains. That’s because you only pay capital-gains taxes when you sell. What’s more, you’ll pay tax at half the rate on capital gains than you would on ordinary income. And you can offset capital gains with capital losses.
- Dividends have tax advantages. You’ll pay tax on dividends in the year you get them, if you hold the shares outside your RRSP. However, dividends on Canadian companies receive favourable tax treatment in Canada, thanks to the dividend tax credit.
RESEARCH IN MOTION LTD., $27.24, Toronto symbol RIM, reported better-than-expected quarterly earnings this week. However, the company cut its full-year earnings forecast because of delays in launching its new smartphones. That caused the stock to drop 21% on Friday. In its 2012 first quarter, which ended May 28, 2011, RIM’s earnings fell 9.6%, to $695 million from $769 million a year earlier (all amounts except share price in U.S. dollars). Earnings per share fell 3.6%, to $1.33 from $1.38, on fewer shares outstanding. Even so, the latest earnings beat the consensus estimate of $1.32. Revenue rose 15.9%, to $4.9 billion from $4.3 billion a year. That fell short of the consensus revenue estimate of $5.1 billion....
CANADIAN NATIONAL RAILWAY CO. $73 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 461.8 million; Market cap: $33.7 billion; Price-to-sales ratio: 4.1; Dividend yield: 1.8%; TSINetwork Rating: Above Average; www.cn.ca) operates Canada’s largest freight-rail network, and serves 16 U.S. states. Microsoft co-founder Bill Gates is CN’s largest shareholder, with just over 10% of the shares. In the three months ended March 31, 2011, CN earned $668 million. That’s up 30.7% from $511 million a year earlier. The company spent $340 million on share buybacks in the latest quarter. Because of fewer shares outstanding, earnings per share rose 34.3%, to, $1.45 from $1.08. If you exclude one-time items in both quarters, mainly gains on sales of rail lines in southern Ontario, earnings per share would have risen 12.5%, to $0.90 from $0.80. Revenue rose 6.1%, to $2.1 billion from $2.0 billion....
Canada’s two main railways face many unpredictable challenges, like bad weather and rising fuel costs. However, both have streamlined their operations. That helps them quickly respond to sudden setbacks. Both should continue to benefit as the improving economy pushes up freight volumes. We like both, but prefer CP for new buying. CANADIAN NATIONAL RAILWAY CO. $73 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 461.8 million; Market cap: $33.7 billion; Price-to-sales ratio: 4.1; Dividend yield: 1.8%; TSINetwork Rating: Above Average; www.cn.ca) operates Canada’s largest freight-rail network, and serves 16 U.S. states. Microsoft co-founder Bill Gates is CN’s largest shareholder, with just over 10% of the shares. In the three months ended March 31, 2011, CN earned $668 million. That’s up 30.7% from $511 million a year earlier. The company spent $340 million on share buybacks in the latest quarter. Because of fewer shares outstanding, earnings per share rose 34.3%, to, $1.45 from $1.08....
CGI GROUP INC., $20.70, Toronto symbol GIB.A, is Canada’s largest provider of computer-outsourcing services. The company’s services can automate certain routine functions, such as accounting and buying supplies. That makes its clients more efficient, and lets them focus on their main businesses. In its fiscal 2011 second quarter, which ended March 31, 2011, CGI earned $117.0 million. That’s up 43.4% from $81.6 million a year earlier. Due to fewer shares outstanding, earnings per share rose 50.0%, to $0.42 from $0.28. If you exclude a tax gain, the company would have earned $0.40 a share in the latest quarter. That beat the consensus earnings estimate of $0.38 a share. Revenue rose 24.5%, to $1.1 billion from $910.4 million a year earlier. If you exclude the negative impact of exchange rates, revenue would have risen 27.9%. Canadian revenue rose 4.3%, and U.S. revenue jumped 67.3%, mainly because the company won a number of new contracts from the U.S. federal government....
METRO INC. $43 (Toronto symbol MRU.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 105.8 million; Market cap: $4.5 billion; Price-to-sales ratio: 0.4; Dividend yield: 1.8%; TSINetwork Rating: Average; www.metro.ca) has about 600 supermarkets and 250 drugstores in Ontario and Quebec. In the three months ended December 18, 2010, Metro’s sales fell 0.5%, to $2.63 billion from $2.65 billion a year earlier. Metro cut its prices due to rising competition from other grocery retailers and Wal-Mart, which continues to expand its grocery offerings. As well, drug prices have fallen due to the expiry of important drug patents and new generic-drug legislation in Ontario. However, earnings rose 3.7%, to $92.0 million from $88.7 million. Earnings per share rose 7.3%, to $0.88 from $0.82, on fewer shares outstanding. These figures exclude one-time items, such as expansion costs and a lower tax bill....
CGI GROUP INC., $19.17, Toronto symbol GIB.A, is Canada’s largest provider of computer-outsourcing services. The company’s services help its customers automate certain routine functions, such as accounting and buying supplies. That makes its clients more efficient, and lets them focus on their main businesses. In its fiscal 2011 first quarter, which ended December 31, 2010, CGI earned $126.6 million. That’s up 13.8% from $111.2 million a year earlier. The company paid $81.0 million to buy back shares during the quarter. Due to fewer shares outstanding, earnings per share rose 21.6%, to $0.45 from $0.37. That easily beat the consensus earnings estimate of $0.34 a share. As a result, the stock gained 5% this week. Revenue rose 22.7%, to $1.1 billion from $913.0 million a year earlier. If you exclude the negative impact of exchange rates, revenue would have risen 25.9%. Canadian revenue rose 0.5%, but U.S. revenue jumped 77.1%, because the company won a number of new federal government contracts. The U.S. gain also reflects the contribution of Stanley Inc., which CGI bought last year. Stanley provides computer-outsourcing services to military and civilian agencies of the U.S. government....
CANADIAN NATIONAL RAILWAY CO. $64 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 465.4 million; Market cap: $29.8 billion; Price-to-sales ratio: 3.8; Dividend yield: 1.7%; SI Rating: Above Average) operates the largest freight rail network in Canada. It also serves 16 U.S. states. Ottawa nationalized CN in 1922, as railways were critical to Canada’s early growth. CN became a publicly traded company in 1995. CN hauls grain and fertilizers (20% of its 2009 revenue), consumer and industrial goods (20%), petroleum products (19%), forest products (17%), metals and minerals (11%), coal (7%) and automotive products (6%). Revenue rose 17.2%, from $7.2 billion in 2005 to $8.5 billion in 2008, mainly due to acquisitions. However, 2009 revenue fell 13.1%, to $7.4 billion....
MANITOBA TELECOM SERVICES INC., $24.98, Toronto symbol MBT, fell 9% on Friday after the company cut its quarterly dividend by 34.6%, to $0.425 a share from $0.65. The new annual rate of $1.70 yields 6.8%. The company is the main provider of telephone services in Manitoba. Its Allstream subsidiary sells telephone, Internet and other communication services to businesses across Canada. The slow economy has cut business spending on new communication systems. That has hurt Allstream’s earnings. As well, Manitoba Telecom’s consumer businesses continue to face strong competition from cable companies....
PENGROWTH ENERGY TRUST, $9.76, Toronto symbol PGF.UN, has agreed to buy the 82% of Monterey Exploration Ltd. (Toronto symbol MXL) that it doesn’t already own. The deal should close in September 2010. Monterey produces oil and natural gas at properties in Alberta and British Columbia. Pengrowth is particularly interested in Monterey’s unconventional gas holdings in northeastern B.C. Monterey lacks the financial resources to develop these assets. That’s why it accepted Pengrowth’s offer. The trust will pay $366 million in units to take full control of Monterey. That includes $30 million of Monterey’s debt, which Pengrowth will assume....