emera

EMERA INC. $20 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 111.2 million; Market cap: $2.2 billion; SI Rating: Average) operates over 40 power plants that supply electricity to roughly 460,000 customers in Nova Scotia. This operation accounts for 85% of its total revenue, and most of its income. To cut its reliance on Nova Scotia, Emera acquired Bangor Hydro in 2001. This subsidiary buys power from various producers and distributes it to over 110,000 customers in eastern Maine. Emera also invests in other energy projects. For example, it recently acquired 19% of the main electrical utility on the Caribbean island of St. Lucia. Emera already owns 12.9% of the Maritimes & Northeast Pipeline, which transports natural gas from the Sable Island reserves south of Nova Scotia to markets in Canada and the Northeastern U.S....

EMERA INC. $20 (Toronto symbol EMA) earned $0.30 a share in the second quarter of 2007, up 15.4% from $0.26 a year earlier, thanks to strong growth at its core Nova Scotia Power subsidiary as well as income from its new power plant in Massachusetts. The better earnings let Emera raise its annual dividend rate 2.2%, from $0.89 to $0.91. It now yields 4.6%. Buy. ANDREW PELLER LTD. $10 (Toronto symbol ADW.A) continues to profit from strong demand for its premium wines. In its first fiscal quarter ended June 30, 2007, earnings per share rose 25.0%, to $0.20 from $0.16 a year earlier. If you exclude unusual items, profits rose 13%. Peller recently increased its dividend for the second straight year. The new annual rate of $0.30 yields 3.0%. Buy. BANK OF MONTREAL $61 (Toronto symbol BMO) has launched a new loyalty MasterCard aimed at students between 18 and 24 years old. The card will give them discounts on merchandise and services at certain stores. The bank feels the new card will help it sell more services to these students as they grow older, such as home mortgages and RRSPs. Buy.

ARBOR MEMORIAL SERVICES INC. $28 (Toronto symbol ABO.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 10.6 million; Market cap: $296.8 million; SI Rating: Average) earned $0.66 a share in its second fiscal quarter ended April 30, 2006, up 8.2% from $0.61 a year earlier. Revenue grew 7.4%, to $59.8 million from $55.7 million, due to higher sales at its funeral division. Arbor is a buy for aggressive investors. TRANSALTA CORP. $27 (Toronto symbol TA; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 202.6 million; Market cap: $5.5 billion; SI Rating: Average) has no plans to purchase affiliate TransAlta Power L.P., which is now trying to boost investor value through a sale due to Ottawa’s plan to tax income trusts. TransAlta Power owns 49.99% of five gas-fired power plants in Ontario, Saskatchewan and Alberta; TransAlta owns the remaining 50.01% and runs the plants....

CANADIAN UTILITIES LTD. $47 (Toronto symbol CU) has raised its dividend each year since 1972. The new annual rate of $1.26 a share yields 2.7%. Thanks to higher electricity rates and gains from its natural gas storage operations, first quarter profits rose 57.4%, to $1.07 a share from $0.68 a year earlier. Buy. EMERA INC. $21 (Toronto symbol EMA) earned $0.36 a share in the three months ended March 31, 2007, down 10% from $0.40 a year earlier. A large industrial customer of subsidiary Nova Scotia Power recently resumed operations, which increased electricity sales. However, the extra revenue failed to cover the higher initial production costs. This a short-term setback, and should not hurt Emera’s $0.89 dividend, which yields 4.2%. Buy. PENGROWTH ENERGY TRUST $19 (Toronto symbol PGF.UN) paid out 92% of its cash flow in distributions in the first quarter of 2007, which is higher than comparable energy trusts. But that’s largely due to the timing of recent acquisitions. Pengrowth’s payout ratio in 2007 should average around 87%. It currently pays monthly distributions of $0.25 a unit (15.8% yield). Buy.

EMERA INC. $20 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 110.9 million; Market cap: $2.2 billion; SI Rating: Average) is the main supplier of electrical power in Nova Scotia, with 470,000 customers. It also provides power to 115,000 customers in Bangor, Maine. Right now, the company gets over 80% of its income from its main Nova Scotia Power subsidiary. Through acquisitions and investments, Emera eventually aims to cut this to 65%. For example, the company plans to invest $350 million in a new pipeline that will transport natural gas from a planned liquefied natural gas terminal in Saint John, New Brunswick to markets in Canada and the Northeastern United States. Emera also recently paid $22 million U.S. for a 19% stake in the main electrical utility on the Caribbean island of St. Lucia....

The move to deregulate electricity markets in the past decade has spurred many utilities to sell their power on the open market, instead of at predetermined rates. While that helps their growth, it also increases volatility. Here are three utilities that prefer regulation, since it helps guarantee their profits. Operating in regulated markets also helps keep out competitors, and gives them plenty of cash for dividends. We see all three as buys, particularly for income-seeking investors....

BCE INC. $30 (Toronto symbol BCE) has completed the sale of its Telesat satellite business for $3.25 billion, or 13.5% of its market cap of $24 billion. The company will use $1.2 billion of that to buy back 5% of its stock. It will probably use the rest to expand its high-speed Internet service, or make acquisitions. It may also increase its $1.46 dividend (4.9% yield). Best Buy. EMERA INC. $21 (Toronto symbol EMA) has acquired a 19% stake in the main electrical utility on the Caribbean island of St. Lucia for $22 million U.S. That’s roughly a third more than the $19.5 million or $0.18 a share it earned in the third quarter of 2006. This is the company’s first investment in this region, but it cuts its reliance on Atlantic Canada. Best Buy. TORSTAR CORP. $19 (Toronto symbol TS.B) recently launched Olive Canada Network, a new service that makes it easier for advertisers to place ads on Torstar’s own web sites, as well as a wide variety of other online sites. The company hopes this new operation will expand revenue from its Internet operations, which now supply roughly 2% of its total revenue. Best Buy.

ROYAL BANK OF CANADA $53 has invested $25 million U.S. for a 30% stake in a new joint venture that will offer asset management services in China. The amount is just 2% of its latest quarterly earnings. But the deal gives Royal a low-risk way to increase its exposure to a fast-growing market. Buy. EMERA INC. $22 earned $0.18 a share in the third quarter of 2006, up 28.6% from $0.14 a year earlier, due to higher electricity rates and profits from the resale of natural gas from the offshore project near Sable Island. Revenue fell 3.1%, to $272.4 million from $281.1 million, due to the temporary shutdown of a large industrial customer. This customer aims to re-start its operations in the fourth quarter. Best Buy. TRANSCANADA CORP. $38 continues to expand its electrical power operations, which have higher growth prospects than its gas pipeline business. Thanks mainly to higher profits at the power unit, earnings before unusual items in the most recent quarter rose 4.2%, to $0.50 a share from $0.48. Revenue grew 23.3%, to $1.85 billion from $1.5 billion. Best Buy.

FORTIS INC. $24 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; SI Rating: Above average) supplies electrical power to around 915,000 customers in five Canadian provinces. It also owns or invests in electrical utilities in New York State, Belize and the Cayman Islands. Its real estate division owns hotels and other commercial properties, mainly in Atlantic Canada. The company has increased its dividend in each of the past 32 years. The current rate of $0.64 a share yields 2.7%. That’s lower than TransAlta, TransCanada and Emera, but we feel that Fortis’s focus on expanding its operations outside of Atlantic Canada should enhance its earnings growth, and let it continue its policy of annual dividend increases. In the second quarter of 2006, Fortis earned $37.9 million, down slightly from $38.2 million a year earlier; per-share earnings remained unchanged at $0.37....

EMERA INC. $20 (Toronto symbol EMA; Income Portfolio, Utilities sector; SI Rating: Average) is the main supplier of electrical power in Nova Scotia, and Bangor, Maine. Emera’s high market share and largely regulated operations give it plenty of steady cash flow to increase dividends (its current dividend of $0.89 a share yields 4.5%) and fund new projects. For example, Emera recently agreed to build a $350 million pipeline that would transport natural gas from a proposed liquefied natural gas (LNG) terminal near Saint John, N.B. to the U.S. portion of the Maritimes & Northeast Pipeline in Maine. (Emera owns 12.9% of the Maritimes & Northeast pipeline.)...