holding company

When picking high dividend stocks, we continue to recommend that you look beyond yield (dividend rate divided by share price). Instead, focus on high-quality companies with long histories of rising payouts, such as these four utilities (including Canadian Utilities, see box on page 74). Their steady cash flows are helping them maintain or raise their dividends, and invest in new growth projects. FORTIS INC. $32 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 196.8 million; Market cap: $6.3 billion; Price-to-sales ratio: 1.5; Dividend yield: 3.6%; TSINetwork Rating: Above Average; www.fortisinc.com) is the main supplier of electrical power in Newfoundland and Prince Edward Island. It also operates power plants in other parts of Canada, as well as the U.S., Belize and the Cayman Islands. In addition, Fortis operates hotels and other businesses in Canada. The company has been working to lower its reliance on Atlantic Canada. In May 2004, it bought regulated electrical utilities in Alberta and B.C. for $1.5 billion in cash and stock. In May 2007, it paid $3.7 billion for the regulated gas-distribution business of Terasen Inc. (now called FortisBC Energy), which has 940,000 customers in B.C. Fortis issued $1.15 billion of shares to help pay for this purchase....

We haven’t found any water-focused stocks we recommend as buys. That’s mostly because the water business has limited growth prospects in developed countries, and is subject to a lot of regulatory hurdles. It may offer more opportunity in developing countries, many of which are in desperate need of clean water, but investing in these countries exposes you to political risk. However, here’s a look at the stocks you asked about: A: GWR Global Water Resources, $6.55, symbol GWR on Toronto (Shares outstanding: 8.8 million; Market cap: $57.3 million; www.gwresources.com), first sold shares to the public and listed on Toronto in December 2010. At the same time, it bought a 48.1% interest in Global Water Resources Inc. (Global Water)....

Royal Gold, $55.65, symbol RGL on Toronto (Shares outstanding: 54.4 million; Market cap: $3.0 billion; www.royalgold.com), mainly invests in royalties from precious and base metals. The company’s current portfolio consists of 187 properties on six continents, including interests in 35 producing mines and 24 development stage projects. Royal Gold’s royalties from gold, silver and base-metal production give it steady cash flow. As well, investing in royalties lets it avoid the costs of owning mines, as well as risks like increasingly strict environmental regulations. However, the company’s growth depends on its ability to acquire new long-term contracts at favourable terms. This may get more difficult if the prices of gold, silver and base metals continue to rise....

Brookfield Infrastructure Partners L.P., $24.05, symbol BIP.UN on Toronto (Shares outstanding: 156.4 million; Market cap: $3.8 billion; www.brookfieldinfrastructure.com), owns a 59% interest in Brookfield Infrastructure L.P., which owns and operates utility, transport, energy and timber assets in North and South America, Australasia and Europe. Among these assets are over 8,800 km of transmission lines in Chile and Ontario, and 433,000 acres of timberland. In the three months ended March 31, 2011, Brookfield’s cash flow per share rose 47.6%, to $0.62 from $0.42. The units yield 5.0%. We don’t see any significant unnoticed value in the infrastructure sector. Brookfield is benefiting from its strong cash flow and its growing number of assets, but it has a complex holding-company structure that could make it difficult to spot problems....

These three utilities are using the steady cash flows from their regulated businesses to invest in new projects. That should spur their long-term earnings, and give them more cash to keep raising their dividends. TRANSCANADA CORP. $39 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 699.5 million; Market cap: $27.3 billion; Price-to-sales ratio: 3.4; Dividend yield: 4.3%; TSINetwork Rating: Above Average; www.transcanada.com) operates a 60,000-kilometre pipeline network that pumps natural gas from Alberta to eastern Canada and the U.S. TransCanada also owns, or has interests in, over 10,900 megawatts of power generation. That includes Bruce Power LP, a nuclear facility in Ontario, and the Ravenswood facility, which serves New York City. TransCanada has spent about $10 billion of the $20 billion it has set aside for new growth projects. It will spend the remaining $10 billion over the next two years. Its biggest project is the Keystone pipeline, which it is building in three phases....

These companies on this page offer investors a way to diversify their Finance sector holdings beyond the big five banks. However, they are only for investors who can tolerate the added risk. DUNDEE CORP. $25 (Toronto symbol DC.A; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 70.7 million; Market cap: $1.8 billion; Price-to-sales ratio: 2.3; No dividends paid; TSINetwork Rating: Average; www.dundeecorp.com) is a holding company that invests in publicly listed and private companies in three main areas: wealth management, real estate and resources. The company recently sold its 48% stake (60% voting interest) in DundeeWealth Inc. to Bank of Nova Scotia (Toronto symbol BNS). DundeeWealth owns the Dynamic family of mutual funds....

RESEARCH IN MOTION INC., $55.78, Toronto symbol RIM, reported better-than-expected earnings this week. However, the stock fell 11%. That’s because the company’s sales forecast for the current quarter fell short of the consensus estimate. In its 2011 fiscal year, which ended February 26, 2011, RIM’s earnings rose 38.8% to $3.4 billion from $2.5 billion in fiscal 2010 (all amounts except share price in U.S. dollars). Earnings per share rose 47.1%, to $6.34 from $4.31, on fewer shares outstanding. That beat the consensus estimate of $6.29 a share. The company shipped a record 52.3 million BlackBerry smartphones in fiscal 2011, up 43% from the prior year. That’s why revenue rose 33.1%, to $19.9 billion from $15.0 billion....

We advise most investors to confine their Finance-sector investments to Canada’s five big banks and other recommendations in our Conservative Growth Portfolio. However, if you can accept more risk, we also like Home Capital and Dundee. HOME CAPITAL GROUP INC. $48 (Toronto symbol HCG; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 34.7 million; Market cap: $1.7 billion; Price-to-sales ratio: 3.3; Dividend yield: 1.5%; TSINetwork Rating: Average; www.homecapital.com) is a mortgage lender that serves borrowers who don’t meet the more stringent criteria of larger, traditional lenders. In the three months ended September 30, 2010, Home Capital’s earnings rose 18.8%, to $45.4 million, or $1.31 a share. A year earlier, the company earned $38.2 million, or $1.10 a share. Low interest rates continue to fuel strong demand for residential mortgages and other loans. That lifted Home Capital’s revenue by 6.7%, to $133.8 million from $125.3 million. The company issued 17.8% more residential mortgages than in the year-earlier quarter. Non-residential mortgages rose 10.9%....

POWER CORP. $27.66 (Toronto symbol POW; Shares outstanding: 409.3 million; Market cap: $11.3 billion; TSINetwork Rating: Above Average; Dividend yield: 4.2%) is a diversified holding company. It holds its financial assets through 66.1%-owned Power Financial. Power Corp.’s financial assets include 68.4% of Great-West Lifeco, one of Canada’s largest life insurers, and 56.6% of IGM Financial, one of the country’s leading mutual-fund companies. Power Financial also owns 50% of holding company Parjointco, which holds a 54.1% stake in Switzerland-listed Pargesa Holdings SA. Pargesa has 95% of its assets in five large European companies: Imerys (minerals), Total SA (oil), Pernod Ricard (wine and spirits), Suez (energy, water and waste services) and Lafarge SA (cement and building materials). Excluding one-time items, Power Corp.’s earnings rose 8.7%, to $274 million, or $0.58 a share, in the three months ended September 30, 2010. A year earlier, it earned $252 million, or $0.53 a share. The increase came from a higher contribution from Power Financial, which gained from its holdings in Great-West Lifeco and IGM Financial....

Power Corp. gives you exposure to a number of high-quality companies that will gain from an ongoing economic recovery. It also trades at a holding company discount, which puts more assets to work for you, and adds a lot of appeal. POWER CORP. $27.66 (Toronto symbol POW; Shares outstanding: 409.3 million; Market cap: $11.3 billion; TSINetwork Rating: Above Average; Dividend yield: 4.2%) is a diversified holding company. It holds its financial assets through 66.1%-owned Power Financial. Power Corp.’s financial assets include 68.4% of Great-West Lifeco, one of Canada’s largest life insurers, and 56.6% of IGM Financial, one of the country’s leading mutual-fund companies. Power Financial also owns 50% of holding company Parjointco, which holds a 54.1% stake in Switzerland-listed Pargesa Holdings SA. Pargesa has 95% of its assets in five large European companies: Imerys (minerals), Total SA (oil), Pernod Ricard (wine and spirits), Suez (energy, water and waste...