emera

EMERA INC. $29 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 132.4 million; Market cap: $3.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 4.8%; TSINetwork Rating: Average; www.emera.com) is Nova Scotia’s main power supplier. It also holds interests in electrical utilities in the U.S. and the Caribbean.

The company continues to invest in promising new projects. For example, it recently agreed to pay $541 million U.S. for three natural-gas-fired power plants in New England. Emera also plans to pay $390 million for a 34.5% stake in a power plant in Labrador. In addition, it will spend $1.5 billion to build an undersea cable that will transmit 20% of this facility’s power to Nova Scotia.

Closing a non-regulated power plant for maintenance helped cut Emera’s second-quarter earnings by 8.0%, to $42.6 million from $46.3 million a year earlier. Earnings per share fell 13.5%, to $0.32 from $0.37, on more shares outstanding. However, overall revenue still rose 1.0%, to $506.5 million from $501.3 million, thanks to colder-than-normal weather in Nova Scotia and higher power rates.
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MANITOBA TELECOM SERVICES INC., $29.00, Toronto symbol MBT, fell 11% this week after the federal government blocked its recent deal to sell its Allstream subsidiary to a private company controlled by an Egyptian billionaire. Allstream provides integrated telephone, Internet and other communication services to over 50,000 businesses across Canada, as well as government agencies. Ottawa felt that selling Allstream to a foreign investor could risk national security. Manitoba Telecom planned to contribute $130 million of the $405 million net proceeds from the sale to its underfunded employees’ pension fund. It would have also paid back $70 million of short-term loans it took out to fund recent pension contributions....

These two utilities continue to expand beyond Atlantic Canada. That adds to their appeal, but only one is a buy right now.

FORTIS INC. $31 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 211.7 million; Market cap: $6.6 billion; Price-to-sales ratio: 1.8; Dividend yield 4.0%; TSINetwork Rating: Above Average; www.fortis.ca) is the main electricity supplier in Newfoundland and Prince Edward Island....

Capital Power Corp., $20.50, symbol CPX on Toronto (Shares outstanding: 71.0 million; Market cap: $1.5 billion; www.capitalpower.com), is one of Canada’s largest independent power producers, with interests in 3,700 megawatts of generation capacity. In the three months ended June 30, 2013, Capital Power’s revenue rose 23.0%, to $321 million from $261 million a year earlier. Cash flow per share jumped to $0.86 from $0.55. The improvements came from greatly improved Alberta power prices, which averaged $123 per megawatt hour in the latest quarter, up from just $40 a year previous....

ROYAL BANK OF CANADA, $64.90, Toronto symbol RY, reported that its earnings rose 11.9% in the three months ended July 31, 2013, to $2.2 billion from $2.0 billion a year earlier. Earnings per share rose 13.2%, to $1.46 from $1.29, on fewer shares outstanding. These figures exclude unusual items, such as a $90-million tax refund in the latest quarter. On that basis, Royal’s earnings beat the consensus forecast of $1.38 a share. However, the bank was forced to write down the value of certain securities it holds, which cut its revenue by 6.9%, to $7.2 billion from $7.8 billion. The bank continues to see strong loan demand at its retail banking operations in Canada, the U.S. and the Caribbean. This division’s earnings, which accounted for 57% of Royal’s total, rose 7.1%....

ALGONQUIN POWER & UTILITIES CORP. $6.96 (Toronto symbol AQN; Shares outstanding: 205.0 million; Market cap: $1.4 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.9%) has nearly tripled in size over the last year through a series of acquisitions.

The company’s regulated utility businesses now provide water, electricity and natural gas utility services to over 470,000 customers, up from 120,000 a year ago. Its hydroelectric, thermal energy and wind plants currently generate 1,100 megawatts of power, up from 460 megawatts.

Emera (Toronto symbol EMA), a recommendation of The Successful Investor, our conservative growth advisory, owns 24.5% of Algonquin.
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iShares S&P/TSX Capped Utilities Fund, $18.29, symbol XUT on Toronto (Shares outstanding: 5.6 million; Market cap: $102.4 million; ca.ishares.com), holds the 11 stocks in the S&P/TSX Capped Utilities Index. The ETF’s MER is 0.60%, and it yields 4.3%. The fund’s holdings are Fortis Inc., 21.0%; Canadian Utilities, 14.9%; Emera, 14.9%; TransAlta Corp., 13.2%; ATCO, 11.6%; Superior Plus Corp., 5.3%; Capital Power Corp., 5.0%; Northland Power, 4.7%; Algonquin Power & Utilities Corp., 3.8%; and Just Energy Group, 3.7%. The weight of any one company is capped at 25% of the index’s market capitalization. As a result, every three months, if the market cap of any given stock has risen above 25% of the total market cap of all the stocks in the index, the fund will sell shares of that stock to bring its weight down to the 25% cap level. The fund then uses the sale proceeds to buy other stocks in the index on a proportional basis....

TELUS CORP., $31.97, Toronto symbol T, gained 3% this week in response to media reports that U.S.-based Verizon Communications (New York symbol VZ) may postpone its plan to enter Canada’s wireless market. Verizon is a recommendation of Wall Street Stock Forecaster, our newsletter that focuses on U.S. stocks. Verizon is reportedly interested in buying two smaller Canadian wireless carriers, Mobilicity and Wind Mobile, and bidding on new wireless frequencies, or spectrum. For technical reasons, Verizon may prefer to buy the new spectrum at an auction to be held in January 2014 before acquiring the two companies. Telus gets 53% of its revenue and 67% of its earnings from wireless services. That makes it particularly vulnerable to new competition from Verizon. Telus’s stock will likely remain volatile until Verizon’s intentions become clearer....

ALGONQUIN POWER & UTILITIES CORP. (Toronto symbol AQN; www.algonquinpower.com) has nearly tripled in size over the last year through a series of acquisitions....

ALGONQUIN POWER & UTILITIES CORP. $6.96 (Toronto symbol AQN; Shares outstanding: 205.0 million; Market cap: $1.4 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.9%) has nearly tripled in size over the last year through a series of acquisitions.

The company’s regulated utility businesses now provide water, electricity and natural gas utility services to over 470,000 customers, up from 120,000 a year ago....