investment

BOMBARDIER INC., Toronto symbols BBD.A $3.77 and BBD.B, $3.71, reported better-than-expected quarterly results this week. Without costs related to its recent restructuring, which included laying off 2% of its workforce, Bombardier’s earnings rose 34.5% in the quarter ended September 30, 2014, to $222 million, or $0.12 a share (all amounts except share prices in U.S. dollars). That beat the consensus estimate of $0.10 a share. A year earlier, the company earned $165 million, or $0.09 a share. Overall revenue gained 20.9%, $4.9 billion from $4.1 billion, also beating the consensus forecast of $4.82 billion....

Pat McKeough responds to many requests from members of his Inner Circle for specific advice on the Canadian stock market and other investments as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week we offer you a report on one of the stocks profiled in these Q&A sessions. We give you Pat’s buy-hold-sell recommendation as well as his analysis of the stock. This is part of the specific buy, hold and sell advice we offer you in our daily posts. Every week you get “A Stock to Sell” on Monday, “Best Canadian Stocks” on Tuesday, and “Our Top U.S. Stocks” on Thursday. Recently we received a question from an Inner Circle member about a Canadian firm that specializes in mortgages. First National Financial is the largest originator of mortgages outside the banks, with almost $80 billion under administration. Pat examines the strategies by which the company sells and securitizes its mortgages in order to free up capital and looks at the effect these strategies have on the company’s short- and long-term profit margins. Q: Dear Pat: What are your thoughts on First National Financial Corp.? Thanks....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a beginning or experienced investor, these weekly updates are designed to give you specific investment advice. Each Investor Toolkit update gives you a fundamental piece of strategy, including advice on various ways of investing money, and shows you how you can put it into practice right away. In this case, the tip comes from a Member of my Inner Circle. Members can ask me and my investment team financial questions of any kind. Aside from questions on specific investments, members ask many other questions about how they should be investing their money....

This week, we have a special report for you—see below—about a number of Canadian stocks that offer a particularly attractive combination of three investment positives: low per-share price-to-earnings ratios, steady or rising dividends, and promising growth prospects. Pat +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++...

We still think investors will profit most—and with the least risk—by buying shares of well-established, dividend-paying stocks with strong business prospects.

These are companies that have strong positions in healthy industries. They also have strong management that will make the right moves to remain competitive in a changing marketplace.

Stocks like these give investors an additional measure of safety in today’s volatile markets. And the best ones offer an attractive combination of moderate p/e’s (the ratio of a stock’s price to its per-share earnings), steady or rising dividend yields (annual dividend divided by the share price) and promising growth prospects.

Here are 20 stocks we think meet those criteria:

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Every Tuesday we bring you “Best Canadian Stocks.” You get our specific recommendation on the stocks we profile, with a full explanation of how we arrived at our opinion. You’ll read about stocks making moves you should know about, from coverage in one of our three newsletters featuring Canadian stocks—The Successful Investor, Stock Pickers Digest and Canadian Wealth Advisor.

Torstar has struggled in the past few years as more people get their news from the Internet, rather than newspapers. But the company is doing a good job of responding to its challenges, which should let it improve its earnings and maintain its current payouts.

TORSTAR CORP. (Toronto symbol TS.B; www.torstar.com) publishes the Toronto Star, Canada’s largest daily newspaper by circulation. It also publishes three other daily papers and over 100 weeklies.

The slow economy continues to hurt advertising sales at Torstar’s newspapers. In the quarter ended June 30, 2014, the company’s revenue fell 7.4%, to $225.6 million from $243.6 million a year earlier.

Earnings jumped 44.2%, to $18.1 million, or $0.23 a share, from $12.6 million, or $0.16 a share. However, if you disregard restructuring costs and other unusual items, earnings per share fell 4.8%, to $0.20 from $0.21.

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Pat McKeough responds to many requests from members of his Inner Circle for specific advice on buying stocks, as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week we offer you a report on one of the stocks profiled in these Q&A sessions. We give you Pat’s buy-hold-sell recommendation as well as his analysis of the stock. This is part of the specific buy, hold and sell advice we offer you in our daily posts. Every week you get “A Stock to Sell” on Monday, “Best Canadian Stocks” on Tuesday, and “Our Top U.S. Stocks” on Thursday.

Recently an Inner Circle member asked about the prospects of a Canadian oil service stock. Aveda provides transportation services for oil and gas producers in both Canada and the United States, with three quarters of its revenue coming from the U.S. The company has made several key acquisitions this year that have added to its profits—and its debt. Pat takes a hard look at the company’s balance sheet and considers its prospects in light of the dampening effect lower oil prices have on energy projects.

Q: Dear Pat: A company that would seem to be moving in the right direction is oil-service firm Aveda. Perhaps I can have your input regarding this prospect?

A: Aveda Transportation and Energy Services Inc. (symbol AVE on Toronto; www.avedaenergy.com) provides transportation services to oil and gas producers in Western Canada and the U.S., mainly in Texas, Pennsylvania, West Virginia and North Dakota. The U.S. supplies around 75% of the company’s revenue.

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These four firms provide vital services to banks, credit card companies and other financial clients. They’re also market leaders with well-established brands, which makes it hard for competitors to lure away their customers. Even so, not all of them are buys right now. STATE STREET CORP. $68 (New York symbol STT; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 423.5 million; Market cap: $28.8 billion; Price-to-sales ratio: 3.0; Dividend yield: 1.8%; TSINetwork Rating: Average; www.statestreet.com) sells accounting and administrative services to large institutional investors, like mutual funds and pension plans. The company’s fee income rises and falls with the value of the mutual funds and other securities it administers. Thanks to improving stock markets and new contracts, its assets under custody and administration rose to $28.4 trillion as of June 30, 2014, up 10.3% from a year earlier....

YUM! BRANDS INC. $69 (New York symbol YUM; Aggressive Growth Portfolio; Consumer sector; Shares outstanding: 437.5 million; Market cap: $30.2 billion; Price-to-sales ratio: 2.3; Dividend yield: 2.4%; TSINetwork Rating: Above Average; www.yum.com) earned $404 million in the three months ended September 6, 2014, up 165.8% from $152 million a year earlier. Per-share earnings rose 169.7%, to $0.89 from $0.33, on fewer shares outstanding. If you disregard unusual items, including last year’s writedown of Yum’s investment in the Little Sheep restaurant chain in China, earnings rose 2.4%, to $0.87 a share from $0.85. Sales declined 3.2%, to $3.35 billion from $3.5 billion. That’s mainly because a food-safety scare has cut traffic at Yum’s KFC outlets in China. As a result, the China division’s same-store sales fell 14%. However, same-store sales rose 3% at the company’s other KFC locations and 3% at Taco Bell. Same-store sales also rose 4% at the India division, while Pizza Hut saw a 1% decline....

TRANSCANADA CORP. $56 (Toronto symbol TRP; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 707.9 million; Market cap: $39.6 billion; Price-to-sales ratio: 3.8; Dividend yield: 3.4%; TSINetwork Rating: Above Average; www.transcanada.com) recently completed the purchase of three more Ontario solar power plants from Canadian Solar Inc. (Nasdaq symbol CSIQ).

TransCanada now owns seven of the nine solar farms it agreed to buy from Canadian Solar in 2011. It will probably take possession of the remaining two in 2015. In all, it will pay about $500 million. To put that in context, TransCanada earned $332 million, or $0.47 a share, in the three months ended June 30, 2014.

The company has 20-year deals to sell the power from these solar farms, which cuts this investment’s risk.

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