Enbridge Inc.

FORT CHICAGO ENERGY PARTNERS L.P. $10.11 (Toronto symbol FCE.UN; Units outstanding: 140.7 million; Market cap: $1.4 billion; SI Rating: Extra Risk; Dividend yield: 9.9%) owns and operates energy pipelines and processing plants across North America. One of its major holdings is a 50% interest in the Alliance natural-gas pipeline, which runs 3,000 kilometres from Fort St. John, B.C., to Chicago. Enbridge Inc. owns the other 50%. Fort Chicago and Enbridge also own 85.4% of the Aux Sable natural gas liquids plant. As well, Fort Chicago owns 100% of the 1,324-kilometre Alberta Ethane Gathering System. In the three months ended March 31, 2010, Fort Chicago’s revenue rose 6.1%, to $160 million from $150.8 million a year earlier. Cash flow per unit was unchanged at $0.23....

FORT CHICAGO ENERGY PARTNERS L.P. $10.05 (Toronto symbol FCE.UN; Units outstanding: 137.9 million; Market cap: $1.4 billion; SI Rating: Extra Risk) has announced that it plans to convert to a dividend-paying corporation before Ottawa starts taxing income trusts on January 1, 2011. The trust’s conversion will likely take place in the fourth quarter of 2010. Fort Chicago owns and operates energy infrastructure across North America. One of its major holdings is a 50% interest in the Alliance natural-gas pipeline, which runs 3,000 kilometres from Fort St. John, B.C., to Chicago. Enbridge Inc. owns the other 50%. Unitholders will be able to exchange their units for common shares of the new corporation on a tax-deferred basis — you won’t pay capital gains tax until you sell....

FORT CHICAGO ENERGY PARTNERS L.P. $8.47 (Toronto symbol FCE.UN; Units outstanding: 136.3 million; Market cap: $1.1 billion; SI Rating: Extra Risk) owns and operates energy infrastructure across North America. One of its major holdings is a 50% interest in the Alliance natural-gas pipeline, which runs 3,000 kilometres from Fort St. John, B.C., to Chicago. Enbridge Inc. owns the other 50%. Fort Chicago and Enbridge also own 85.4% of the Aux Sable natural gas liquids plant. As well, Fort Chicago owns 100% of the 1,324-kilometre Alberta Ethane Gathering System. Fort Chicago has added to its power-plant holdings over the last couple of years. It now owns natural gas-fired cogeneration plants in Ontario, California and Colorado, plus power plants in Ontario and Prince Edward Island....

EPCOR POWER, L.P. $15.04 (Toronto symbol EP.UN; Shares outstanding: 53.9 million; Market cap: $810.7 million; SI Rating: Extra Risk) has interests in 25 power plants in Canada and the U.S. These generate a total of 1,400 megawatts. In the three months ended June 30, 2009, EPCOR’s revenue rose 14.8%, to $165.2 million from $143.9 million. Cash flow per unit rose 29.1%, to $0.71 from $0.55. The trust’s plants generated and sold more power, including output from the Morris cogeneration facility in Illinois, which EPCOR bought late last year for $72.2 million U.S. Despite the improved results, EPCOR was still paying out almost all of its cash flow to unitholders, so it cut its quarterly distribution by 30.2%, to $0.44 a unit from $0.63, with the June 2009 payment. At this rate, it will pay out roughly 75% of its cash flow. EPCOR believes it can sustain this rate regardless of whether it remains a trust or converts to a corporation in 2011, when Ottawa’s new income-trust tax takes effect. EPCOR now yields 11.2%....

Consumers’ Waterheater Income Fund, $6.34, symbol CWI.UN on Toronto (Units outstanding: 49.5 million; Market cap: $314 million), owns a portfolio of about 1.3 million installed gas-fired water heaters. These are mainly rented to residential customers in Ontario. About 40% of the 3.4 million households connected to the Ontario natural-gas system rent from the fund. These are mainly located in the Greater Toronto Area. Direct Energy (formerly part of Enbridge Inc.) services the fund’s water heaters and gets 35% of most rental revenue. In June 2006, Direct Energy sold its 19.9% equity interest in the fund. Enbridge started the water-heater rental program in the late 1950s, to encourage Ontario customers to switch to natural gas. This, in turn, would build year-round demand for Enbridge’s gas supply. Through the rental program, homeowners can install and maintain their water heaters with no capital outlay. The Canadian water-heater rental market is mainly limited to Ontario....

EPCOR POWER, L.P. $13.80 (Toronto symbol EP.UN; Shares outstanding: 53.9 million; Market cap: $743.8 million; SI Rating: Extra Risk) has interests in 26 power plants in Canada and the U.S. In total, the plants generate 1,502 megawatts. In the three months ended December 31, 2008, EPCOR’s revenue fell 9%, to $103.8 million from $114.1 million. The decline came mostly from currency-related factors. Cash flow per unit fell 6.3%, to $0.59 from $0.63, mainly because of higher operating costs at some plants. EPCOR pays a quarterly distribution of $0.63 per unit, for a yield of 18.3%. The company paid out 107% of its cash flow in the latest quarter. The high level came largely from unusually high maintenance costs. That spending has now slowed, but the payout ratio could still be as high as 102% this year. That makes a distribution cut a possibility. However, the trust has room to cut while maintaining a high yield....

FORT CHICAGO ENERGY TRUST $8.68 (Toronto symbol FCE.UN; Shares outstanding: 134.1 million; Market cap: $1.2 billion; SI Rating: Extra Risk) owns 50% of the Alliance Pipeline, which runs 3,000 kilometres from Fort St. John, B.C., to Chicago. Enbridge Inc. owns the other 50% interest. The two partners also own 85.4% of the Aux Sable natural gas liquids plant. As well, Fort Chicago owns the 1,324-kilometre Alberta Ethane Gathering System. Fort Chicago has added to its power-plant interests over the last couple of years. It now owns natural gas-fired cogeneration facilities in Ontario and California, plus power generation systems in Ontario and Prince Edward Island. It recently bought the Brush II Cogeneration plant in Colorado for $32 million U.S. In the three months ended June 30, 2008, Fort Chicago’s revenue rose 31.4%, to $178.7 million from $135.9 million a year earlier. The higher revenue mainly resulted from Fort Chicago’s purchase of Countryside Canada Power in August 2007. Cash flow per unit rose 3.3% in the quarter, to $0.31 from $0.30....

EPCOR POWER, L.P. $17.41 (Toronto symbol EP.UN; Shares outstanding: 53.9 million; Market cap: $938.3 million; SI Rating: Extra risk) owns 20 power plants in Canada and the U.S. with total generating capacity of 1,464 megawatts. In the three months ended September 30, 2008, revenues fell 10%, to $138 million from $153.4 million. The decline came mostly from currency related factors. Despite the lower revenue, however, cash flow per unit rose 8.5%, to $0.64 from $0.59. EPCOR pays a quarterly distribution of $0.63 per unit. That gives the units a current annual yield of 14.5%. The company paid out 101% of its cash flow in the latest quarter. But that high level came largely from unusually high maintenance expenditures. That spending has now slowed, and the payout ratio should drop below 100%. That should also let EPCOR hold its distributions steady....

BMO DIVIDEND FUND $44.99 (BMO Mutual Funds, 77 King Street West, Suite 4200, Royal Trust Tower, Toronto, Ont., M5K 1J5, 1-800-665-7700; Web site: www.bmo.com. No load — deal directly with the bank) (CWA Rating: Conservative) currently holds about 36.3% of its portfolio in the Financial services industry. Its next-largest holdings are Energy at 24.4% and Consumer discretionary at 9.1%. BMO Dividend Fund’s largest holdings are Manulife Financial, Bank of Nova Scotia, CIBC, Royal Bank of Canada, Power Financial Corporation, Toronto-Dominion Bank, TransCanada Corporation, Imperial Oil, Suncor Energy, EnCana Corporation, Enbridge Inc., Husky Energy and Sun Life Financial. Over the last five years, the $5.2 billion BMO Dividend Fund has posted a 12.1% annual rate of return. That’s under the S&P/TSX’s gain of 18.2%. However, the S&P/TSX index held a high 40% or so of its holdings in Resources shares. That’s been one of the best-performing, although riskiest, sectors. The fund lost 5.6% over the last year, compared to a gain of 6.8% for the S&P/TSX index. BMO Dividend’s MER is 1.71%....

BMO Dividend and RBC Canadian Dividend hold mostly high-quality stocks. Even high-quality stocks sometimes run into trouble and go through lengthy struggles, just like lesser investments. Eventually, though, most solve their problems and go on to thrive anew. Both funds hold a high proportion of their assets in financial services stocks. However, if you must focus on something, finance is a relatively stable sector, at least in Canada. If you do invest in these funds, be sure to adjust the rest of your portfolio so these funds won’t overly concentrate your holdings in the financial sector....