holding company

BANK OF NOVA SCOTIA, $53.59, Toronto symbol BNS, is buying the 82% of DundeeWealth Inc. (Toronto symbol DW) that it does not already own. DundeeWealth manages investments and operates a brokerage business. The company also owns the Dynamic family of mutual funds, and provides financial-planning and investment advice. DundeeWealth is a recommendation of Stock Pickers Digest, our newsletter for aggressive investing. The deal will double the size of Bank of Nova Scotia’s mutual-fund business, and make it the fifth-largest mutual-fund company in Canada. It gives also gives the bank a number of new growth opportunities: Bank of Nova Scotia will now be able to sell more of its products and services to DundeeWealth’s high-quality clientele. As well, the bank may sell Dynamic funds through its branches in Asia and Latin America. Moreover, by expanding its wealth-management business, Bank of Nova Scotia is putting itself in a position to profit as more baby boomers approach retirement....

ATCO LTD. (Toronto symbols ACO.X (class I non-voting) $57 and ACO.Y (class II voting) $57; Income Portfolio, Utilities sector; Shares outstanding: 58.1 million; Market cap: $3.3 billion; Price-to-sales ratio: 1.0; Dividend yield: 1.9%; TSINetwork Rating: Above Average; www.atco.com) is a holding company. Its main subsidiary is 52.2%-owned Canadian Utilities (see CANADIAN UTILITIES LTD. - Toronto symbols CU $50 and CU.X $50). ATCO recently grouped its businesses into three main divisions: Utilities (which distributes electricity and natural gas); Energy (which operates power plants); and Structures & Logistics (which sells services to construction companies and firms that explore for oil and natural gas). ATCO owns 75.5% of the Structures & Logistics division; Canadian Utilities owns the remaining 24.5%. The company earned $1.02 a share (or a total of $59.1 million) in the three months ended September 30, 2010. That’s up 10.9% from $0.92 a share (or $53.3 million) a year earlier. These figures exclude one-time items, such as losses on hedging contracts. Regulators let ATCO’s utilities businesses increase their rates. As well, rising oil and mineral prices have prompted mining and energy firms to increase exploration. That has lifted earnings at ATCO’s structures business. Revenue rose 11.2%, to $761.1 million from $684.3 million....

In light of today’s low interest rates, we continue to recommend that income-seeking investors buy high-quality utility stocks instead of bonds. These five utilities’ dividend yields have come down lately, but that’s because their stock prices are rising, not because they are cutting their payouts. In fact, all five have been raising their dividends, and their steady cash flows will let them continue to do so. FORTIS INC. $32 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 173.7 million; Market cap: $5.6 billion; Price-to-sales ratio: 1.5; Dividend yield: 3.5%; TSINetwork Rating: Above Average; www.fortis.ca) 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. Fortis’ other businesses include Terasen Inc., which distributes natural gas in B.C., and hotels in Atlantic Canada....

DUNDEE CORP. $17 (Toronto symbol DC.A; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 73.8 million; Market cap: $1.2 billion; Price-to-sales ratio: 1.0; No dividends paid; TSINetwork Rating: Average; www.dundeecorp.com) is a holding company with subsidiaries in three main areas: wealth management, real estate and resources. The company’s main asset is its 49% stake (61% voting interest) in DundeeWealth Inc. (Toronto symbol DW), which provides investment-management, securities-brokerage, financial-planning and investment-advisory services. DundeeWealth also owns the Dynamic family of mutual funds. In the three months ended September 30, 2010, Dundee- Wealth’s earnings jumped 104.7% from a year earlier. That’s mainly because rising stock markets have increased the value of its assets under management by 26.8%; DundeeWealth’s fee income varies with the value of these assets. Rising mutual-fund sales are also fuelling this subsidiary’s earnings. Dundee Corp. is a buy.

DUNDEE CORP. $12 (Toronto symbol DC.A; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 71.2 million; Market cap: $854.4 million; Price-to-sales ratio: 0.7; No dividends paid; SI Rating: Average) is a holding company with subsidiaries in three main areas: wealth management, real estate and resources. In the three months ended June 30, 2010, Dundee earned $51.2 million, or $0.64 a share. That’s up 71.5% from $29.9 million, or $0.39 a share, a year earlier. In the latest quarter, Dundee realized a $45.7-million gain on the sale of securities. A year earlier, these gains totalled just $120,000. That was the main reason for the higher earnings. Dundee is a hold....

Nautilus Minerals Inc., $2.12, symbol NUS on Toronto (Shares outstanding: 155.6 million; Market cap; $329.8 million), is exploring for high-grade sulphide deposits on the ocean floor. These deposits often contain copper, gold, zinc and silver. Russian steel and mining holding company Metalloinvest owns 21% of Nautilus. Other major investors include U.K.-based Anglo American plc, one of the world’s largest mining companies, which has an 11.1% stake and Teck Resources (6.8%). Nautilus is mainly focused on developing its Solwara 1 project near Papua New Guinea. The company plans to use deep-water robotic equipment to dredge the ocean floor and pump the material to barges on the surface. From there, the barges will ship the material to an onshore plant for processing....

ATCO LTD. (Toronto symbols ACO.X (class I non-voting) $51 and ACO.Y (class II voting) $51; Shares outstanding: 58.4 million; Market cap: $3.0 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.1%; SI Rating: Above Average) is a Calgary-based holding company. ATCO’s main subsidiary is 52.2%-owned Canadian Utilities Ltd. (also in this issue). ATCO has three main divisions: Utilities (which distributes electricity and natural gas); Energy (which operates power plants); and Structures & Logistics (which provides services to energy exploration and construction companies). ATCO owns 75.5% of the Structures & Logistics division; Canadian Utilities owns the remaining 24.5%. Earlier this year, the company paid a $3.0 million premium in connection with the buyback of $150 million of its preferred shares. However, the buyback should save it $3.9 million in dividend payments in 2010....

Aqua America, $18.76, symbol WTR on New York (Shares outstanding: 137 million; Market cap: $2.6 billion), is the holding company for a number of water and wastewater utilities. Together, these companies serve about three million customers in 12 states, including Pennsylvania, Ohio, North Carolina, Illinois, Texas, New Jersey, Florida and Indiana. Aqua America plans to keep growing by acquisition. That adds risk, but most of the company’s purchases are small. For example, it recently bought the water-system assets of the New Jersey community of Bloomsbury Borough. That added about 1,000 residential and business customers. The stock trades at 22.1 times the $0.85 a share that Aqua America will likely earn in 2010. The shares yield 3.1%. Aqua America is okay to hold....

DUNDEE CORP. $13 (Toronto symbol DC.A; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 73.8 million; Market cap: $959.4 million; Price-to-sales ratio: 0.9; No dividends paid; SI Rating: Average) is a holding company with subsidiaries in three main areas: wealth management, real estate and resources. In the three months ended March 31, 2010, Dundee earned $23.9 million, or $0.27 a share. That’s a big improvement over the $8.2 million, or $0.11 a share, it lost a year earlier. In the latest quarter, Dundee realized an $18.6-million gain on the sale of securities. In the year-earlier quarter, it wrote down $9.0 million of securities. That was the main reason for the improved earnings. Dundee is a hold.

Power Corp. trades at a holding company discount, which puts more assets to work for you, and adds a lot of appeal. The company also gives you exposure to a number of high-quality companies. POWER CORP. $27.32 (Toronto symbol POW; Shares outstanding: 409.1 million; Market cap: $11.2 billion; SI Rating: Above Average; Dividend yield: 4.3%) is a diversified holding company. It holds its financial assets through 66.3%-owned Power Financial. Power Corp.’s financial assets include 68.6% of Great-West Lifeco, one of Canada’s largest life insurers, and 56.3% 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)....