investment

Pat McKeough responds to many personal questions on investing in stocks 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 the Inner Circle. This week, one Inner Circle member asked about one of the more recent energy stocks on the scene. This specialist in deep-sea drilling has only been in business for seven years, which gives it the advantage of having modern high-quality rigs that are in demand. Pat assesses the company’s ability to keep adding to its record backlog and maintain its high dividend yield....

RIOCAN REAL ESTATE INVESTMENT TRUST $27.48 (Toronto symbol REI.UN; Units outstanding: 295.9 million; Market cap: $8.2 billion; TSINetwork Rating: Average; Dividend yield: 5.0%; www.riocan.com) is Canada’s largest real estate investment trust (REIT). It has interests in 278 shopping malls in Canada, including 10 under development. These properties contain over 59 million square feet of leasable area. RioCan recently ended its joint venture with Cedar Shopping Centers in the U.S., so it now owns 100% of all of its 48 malls in that country. RioCan held 80% of this venture, which owned 22 shopping centres in the U.S. Under the deal, RioCan will buy Cedar’s 20% stake in 21 malls, while Cedar will buy RioCan’s 80% stake in another mall. In the quarter ended June 30, 2012, RioCan’s revenue rose 13.5%, to $269 million from $237 million a year earlier. Cash flow per unit rose 2.8%, to $0.37 from $0.36. The units yield 5.0%....

Yesterday, I discussed the steps investors can take to put a financial contingency plan in place in case a day comes when they are incapacitated (view the article here). Today I’d like to follow up by dealing with another aspect of investing that looms larger as people grow older. Like a financial contingency plan, it is linked to the legacy you will leave your heirs. Now and then I meet investors who say they are too old to consider the long term in their portfolios, and have switched from stocks to short-term instruments such as T-bills. Sometimes they support this decision with the time-worn one-liner from Ronald Reagan (or was it cigar-smoking comedian George Burns?): “I don’t even buy green bananas anymore.”...

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network....

Cominar REIT, $23.99, symbol CUF.UN on Toronto (Units outstanding: 123.6 million; Market cap: $3.0 billion; www.cominar.com), is the largest commercial property owner in Quebec. In all, the real estate investment trust owns 415 properties, including 82 office buildings, 158 shopping malls and 175 industrial and mixed-use buildings. These properties contain more than 30.7 million square feet of leasable space located in Montreal (56%), Quebec City (24%), the Atlantic provinces (9%), western Canada (4%), other parts of Quebec (3%), the Ottawa/Gatineau region (2%) and Ontario (2%). Cominar’s occupancy rate is 94.5%. The trust continues to grow by acquisition. In March 2012, it purchased Canmarc REIT for $904.6 million. That increased Cominar’s leasable space by 44%....

Government Properties Income Trust, $23.64, symbol GOV on New York (Units outstanding: 47.1 million; Market cap: $1.1 billion; www.govreit.com), is a real estate investment trust (REIT) that gets about two-thirds of its revenue by leasing office space to the U.S. federal government. State governments rent another 20% of its offices, and the United Nations leases 5%. Most of the REIT’s properties are in California, Maryland, New York, Georgia, Massachusetts and Washington, D.C. In the three months ended June 30, 2012, Government Properties’ revenue rose 19.4%, to $50.3 million from $42.1 million a year earlier. Cash flow rose 15.8%, to $24.4 million from $21.0 million. Cash flow per unit was unchanged from $0.52 because the REIT issued more units to pay for recent acquisitions. These acquisitions included: two office properties located in Everett, Washington leased to the State of Washington and occupied by the Department of Social and Health Services for $20.4 million; and an office property in Albany, New York leased to the State of New York and occupied by the Department of Agriculture for $8.5 million....

In September 2011, gold hit an all-time high of $1,900.30 U.S. an ounce. It now trades at around $1,772.50. Gold could well regain its highs and move up even further over the longer term, although it will likely remain volatile. Higher prices would arise from investor fears that inflation or global political and economic instability will hurt key currencies, such as the euro or the U.S. dollar. We feel that it’s okay to hold some gold or silver stocks as part of the Resources component of a well-balanced portfolio, but you’ll want to keep them to a reasonable part of that portfolio....

ENBRIDGE INC. $38.65 (Toronto symbol ENB; Shares outstanding: 796.9 million; Market cap: $30.8 billion; TSINetwork Rating: Above Average; Dividend yield: 2.9%; www.enbridge.com) recently finished repairing its leaking oil pipeline in Wisconsin.

The company has faced criticism over leaks like this. That could hurt its proposed $5.5- billion Northern Gateway project, which would pump oil from Edmonton to Kitimat, B.C.

However, Enbridge still has a strong safety record, and it has pledged to spend an extra $500 million on safety for Northern Gateway. This investment includes thicker steel at river crossings, 50% more inspections and aroundthe- clock staffing at remote pumping stations.

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GREAT-WEST LIFECO INC. $22 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 949.8 million; Market cap: $20.9 billion; Price-to-sales ratio: 0.7; Dividend Yield: 5.6%; TSINetwork Rating: Above Average; www.greatwestlifeco.com) is Canada’s largest insurance company, with $523.6 billion of assets under administration. It also sells mutual funds and retirement planning and wealth management services. Power Financial Corp. (Toronto symbol PFC) owns 68.2% of Great-West.

Top brands are a big plus

In Canada, the company sells its products under several well-known banners, including Great West Life, Canada Life and Freedom 55. The Canadian division supplies 51% of Great-West’s earnings.

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RIOCAN REAL ESTATE INVESTMENT TRUST $28 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 263.4 million; Market cap: $7.4 billion; Price-to-sales ratio: 5.2; Dividend yield: 4.9%; TSINetwork Rating: Average; www.riocan.com) is ending its joint venture with Cedar Shopping Centers (New York symbol CDR). RioCan holds 80% of this venture, which owns 22 malls in the U.S.

Under the terms of the deal, RioCan will buy Cedar’s 20% stake in 21 malls, while Cedar will buy RioCan’s 80% stake in another mall. RioCan will pay Cedar $39.0 million. That’s equal to 37% of its second quarter cash flow of $106.0 million, or $0.37 a unit.

RioCan is a buy.

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