investment

CANADIAN PACIFIC RAILWAY LTD. $97.70, Toronto symbol CP, rose 5% this week after the company announced a major restructuring plan aimed at improving its efficiency. CP’s strategy includes cutting 25% of its workforce, making its trains longer and faster, and closing some terminals. CP didn’t say how much these moves would cost. However, the restructuring should help cut its operating ratio from 74.1% to around 65% in 2016. (Operating ratio is calculated by dividing a company’s regular operating costs by its revenue. The lower the ratio, the better.) In addition, CP has suspended its plan to build new rail lines that would have served coal mines in the Powder River Basin in Montana and Wyoming. The company received an exclusive option to build these lines as part of a 2007 acquisition. However, power plants are switching to natural gas, which has hurt demand for coal. As a result, CP will write down this option and related assets by $180 million. That’s equal to 80% of the $224 million, or $1.30 a share, that it earned in the third quarter of 2012....

Pat McKeough responds to many personal questions about specific stock market investments and other investment topics from the members of his Inner Circle. 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 one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle. This week, one Inner Circle member asked us about one U.S. stock that sells three popular fast food items—donuts, coffee and ice cream. Pat looks at the company’s chances to expand in the U.S. and overseas and also examines its venture in the fast-growing business of K-Cups for home coffee machines....

When you select finance-sector investments, we recommend that you begin with Canada’s big-five banks due to their long record of profits and rising dividends. We then recommend diversifying your holdings with non-bank finance stocks like these four. Conservative investors should stick with Great-West and IGM. More aggressive investors should also consider Home Capital and Dundee. GREAT-WEST LIFECO INC. $23 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 949.9 million; Market cap: $21.8 billion; Price-to-sales ratio: 0.7; Dividend Yield: 5.3%; TSINetwork Rating: Above Average; www.greatwestlifeco.com) is Canada’s largest insurance company, with $532.3 billion of assets under administration. It also sells mutual funds and financial services, such as retirement planning and wealth management. Power Financial (Toronto symbol PFC) owns 68.2% of Great-West....

Asset allocation funds are mutual funds whose managers believe they can improve returns and/or reduce risk by switching back and forth among stocks, bonds and cash. Many in the investment industry promote these funds as a simple and profitable way to assemble a diversified portfolio. But as is so often the case with such investment “products,” the results rarely live up to the hype....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on investments, including errors to avoid when you are buying stocks. Each Investor Toolkit update gives you a fundamental piece of investing strategy, and shows you how you can put it into practice right away. Today’s tip: “If you can avoid these 3 common investor errors, you significantly improve your chances of achieving positive returns.”...

From time to time, we create special reports about timely subjects that are likely to interest our clients. As an Inner Circle member, you get a free “first-look” at these reports, before anyone else. We have begun work on a new special report on how you can profit during President Obama’s second term in office. One key aspect of Obama’s second term is that the weak economic growth since the recession is likely to continue in the next few years. After all, rising taxes tend to hurt economic growth. Taxes are sure to rise, as Congress struggles to control the ballooning U.S. federal budget deficit and exploding U.S. debt....

Dividends often don’t get the respect they deserve, especially from beginning investors. That’s because a dividend stock’s yearly 3% or 5% yield may not seem impressive alongside yearly capital gains of 10%, 20% or 30% or more. Yet dividends are far more reliable than capital gains. So with today’s low interest rates, investors are paying more attention to dividend yields (a company’s total annual dividends paid per share divided by the current stock price). That’s why the high dividend yield of a company like Bell Aliant stands out....

Knowing when to sell a stock is one of the keys to successful investing. That’s why we advise investors to follow an important rule when it comes to rising stocks. When prices go down, investors naturally focus on when to sell aggressive stocks. However, you also need to consider when to sell after strong moves up by hot stocks....

H&R REAL ESTATE INVESTMENT TRUST $24.13 (Toronto symbol HR.UN; Units outstanding: 187.3 million; Market cap: $4.4 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.2%; www.hr-reit.com) has increased its distribution for the 10th consecutive quarter. The REIT began raising its payout in early 2010 with the goal of reaching an annual rate of $1.25 in the fourth quarter of 2012.

The latest increase of 4.2%, to $0.10417 per month from $0.10, lets it achieve that goal.

But its strong cash flow, up 35.1% to $0.50 a unit from $0.37 a year ago, prompted it to go further, raising its distribution by 8%, to $0.1125 per month, or $1.35 a year, starting in January 2013. That gives it a 5.6% yield.

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CANADIAN REIT $41.64 (Toronto symbol REF.UN; Units outstanding: 68.0 million; Market cap: $2.8 billion; TSINetwork Rating: Extra Risk; Dividend yield: 3.6%; www.creit.ca) owns over 190 properties, including retail, industrial and office buildings, located across Canada and in Chicago. These properties contain over 19.6 million square feet of leasable area. The trust’s occupancy rate is 94.7%.

In the three months ended June 30, 2012, million from $80.3 million a year earlier. Cash flow per unit rose 12.1%, to $0.65 from $0.58.

Canadian REIT added $298.5 million of properties in the first half of this year, including two office buildings, a further investment in the Dartmouth Crossing (the largest unenclosed mall in Atlantic Canada) and the completion of several development projects. That total also included 50% of Calgary Place, a 575,000-square-foot office and retail complex it bought for $156.0 million in April 2012.

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