imperial oil

IMPERIAL OIL LTD. $45 earned $0.85 a share in the three months ended June 30, 2006, up 63.5% from $0.52 a year earlier. If you disregard a one-time tax credit, Imperial’s second quarter profits would have grown 34.6%, to $0.70 a share. Revenue slipped to $6.7 billion from $6.8 billion, due to lower natural gas production and prices. Rising costs at Imperial’s proposed oil sands and gas pipeline projects could hurt future growth. Hold. TELUS CORP. $52 continues to benefit from growing demand for wireless services. In fact, it now has more wireless customers than traditional telephone customers. Thanks to a 14% jump in the number of wireless subscribers in the past year, Telus earned $0.69 a share before one-time items in the second quarter of 2006, up 32.7% from $0.52 a year earlier. Revenue rose 7.0%, to $2.14 billion from $2.0 billion. Buy. BANK OF MONTREAL $64 is the first Canadian bank to receive permission to provide banking services in Beijing using China’s local currency. That will let it offer a broader array of services, and give it an advantage over other foreign banks. Buy.

IMPERIAL OIL LTD. $39 (Toronto symbol IMO; Conservative Growth Portfolio, Resources sector; SI Rating: Average) gets about 80% of its oil production from its oil sands projects, mostly its 100%-owned Cold Lake facility. Imperial also owns 25% of the Syncrude Canada Ltd. oil sands project, which recently had to cut production due to problems with some new equipment. The company is currently working on its new Kearl Lake oil sands project, which could begin production in 2010. While oil sands developments have great long-term potential, they often cost much more than originally planned. That adds to Imperial’s risk, particularly if oil prices move down....

IVY CANADIAN FUND $29.46 (CWA Rating: Conservative) invests in high-quality, largecapitalization stocks. The $4.8 billion fund’s top holdings include Shoppers Drug Mart, Yellow Pages Income Fund, Manulife Financial, Danaher Corp., Reckitt Benckister plc, Bank of Nova Scotia, Canadian National Railway, Loblaw, Imperial Oil and Omnicom Group. Ivy Canadian’s breakdown by industry is: Consumer staples, 26.9%; Financials, 21.6%; Consumer discretionary, 12.8%; Industrials, 12.7%; and Energy, 6.6%. Ivy Canadian made 8.4% annually over the last 10 years, compared to the S&P/TSX’s gain of 10.9%. The fund’s MER is 2.44%. It holds a high cash level of 9%....

At one time, mutual funds within a particular ‘fund family’ often shared some key investment characteristic, such as a conservative or aggressive investment approach, or a stress on value as opposed to growth. However, due to trends in the mutual-funds industry such as corporate mergers and takeovers, and more aggressive marketing, a fund’s membership in a fund family now has little bearing on its investment approach or appeal as an investment. Below, for instance, we analyse five funds from the Ivy Group. (Note that Ivy is now part of Mackenzie Financial, which in turn is part of IGM Financial. The contact information listed for Ivy Growth and Income also applies to the other four.)...

The Canadian dollar remains high, in part due to rising commodity prices. Unlike many industrialized countries, Canada is a major exporter of commodities, particularly oil and metals. Hopes that the new Conservative government of Prime Minister Harper will cut taxes and improve productivity have also raised demand for Canadian dollars on foreign exchange markets. The Bank of Canada has raised interest rates for seven consecutive months, largely in response to rising inflation. This pushes up the value of the Canadian dollar, as foreign capital moves into Canada to take advantage of higher yields....

BMO DIVIDEND FUND $45.82 (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 53.1% of its portfolio in the Financial services industry. Its next-largest holding is Energy at 13.3%. BMO Dividend Fund’s largest holdings are Manulife Financial, Bank of Nova Scotia, CIBC, Royal Bank of Canada, Enbridge, Toronto-Dominion Bank, Canadian National Railway, TransCanada Corporation, Imperial Oil, Power Financial, Shell Canada and Sun Life Financial. Over the last five years, the $5 billion BMO Dividend Fund has posted a 13.3% annual rate of return. That’s much better than the S&P/TSX 60’s gain of 11.2%. The fund gained 24.1% over the last year, compared to a gain of 30.2% for the S&P/TSX 60. BMO Dividend’s MER is 1.75%....

BMO Dividend and Royal Dividend hold mostly high-quality stocks. These stocks sometimes run into deep 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. 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. BMO Dividend and Royal Dividend have both outperformed AIC Diversified Canada over the last year, even though it also has a financial focus. That’s because they hold lots of our favourite high-quality stocks. If you’re looking for income and growth, we prefer these two funds for new buying....

IMPERIAL OIL $116 (Toronto symbol IMO; SI Rating: Average) is Canada’s largest integrated oil company, with operations in all phases of the petroleum industry. In the three months ended March 31, 2006, Imperial’s earnings rose 58.4%, to $591 million or $1.79 a share, from $393 million or $1.13 a share. Revenues fell 2.5%, to $5.8 billion from $5.9 billion a year earlier. The company plans to split its share on a three-for-one basis. Imperial’s cash flow rose 58% in the latest quarter, to $894 million from $566 million. However, cash flow per share rose 65.6%, to $2.70 from $1.63. The higher per-share figure reflects aggressive stock buybacks. The company bought back $542 million of its stock in the latest quarter. Imperial holds cash of $715 million....

NOVA CHEMICALS CORP. $36 shut down a major plastics plant in Ontario last September for an upgrade. However, problems with new machinery kept the plant closed until just a few weeks ago. The company hopes to recover some of these extra costs from its equipment suppliers. Earnings should rebound in 2006, and the stock now trades at just 7.4 times the $4.23 U.S. a share it will probably make this year. Nova is a buy. THOMSON CORP. $43 earned $0.62 a share before unusual items in the fourth quarter of 2005, up 26.5% from $0.49 a year earlier (all amounts except share price in U.S. dollars). Revenue grew 4.4%, to $2.4 billion from $2.3 billion, largely due to strong demand for its electronic information products. The company also raised its annual dividend rate 10%, from $0.80 U.S. a share to $0.88 U.S. It now yields 2.4%. But the stock is still expensive in relation to its prospects. Hold. IMPERIAL OIL LTD. $109 plans to split its stock on a 3-for-1 basis in May 2006, subject to shareholder approval. That will improve the stock’s liquidity. However, Imperial’s investments in new oil sands projects could hurt its earnings. Its proposed Mackenzie Valley natural gas pipeline has also run into problems. Hold

IMPERIAL OIL LTD. $119 earned $3.00 a share in the fourth quarter of 2005, up 96.1% from $1.53 a year earlier, largely due to higher oil and gas prices. Cash flow per share rose 46.3%, to $3.76 from $2.57. (Note: we have not adjusted these per share figures for a 3-for-1 split planned for May 2006.) However, Imperial’s earnings growth could slow in the next year or two as it expands its oil sands and pipeline investments. Hold. ALIANT INC. $29 earned $0.41 a share in its latest quarter, up sharply from just $0.04 a year earlier, mostly due to the end of a five-month strike in 2004. Strong demand for wireless and high-speed Internet services also helped drive earnings. The company also increased its annual dividend rate 5.1%, from $1.18 a share to $1.24. It now yields 4.3%. Buy. ANDRES WINES LTD. $26 plans to consolidate two of its wineries in B.C. This will cost it $2.5 million, but should cut its long-term operating costs. Higher grape prices cut Andres profits in its latest quarter 22.2%, to $3.5 million from $4.5 million a year earlier. Per-share earnings fell to $0.72 from $0.93. The stock is still a buy.