investment

Xylem Inc., $25.65, symbol XYL on New York (Shares outstanding: 185.4 million; Market cap: $4.6 billion; www.xyleminc.com), sells equipment and services related to managing water. The company’s products help its clients collect, distribute, use and return water to the environment. Xylem is a Greek-derived word that refers to vascular tissue that carries water and nutrients through plants. The company operates through two divisions:...

Pat McKeough responds to many personal questions on specific 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. This past week, one Inner Circle member asked about dividend stocks—specifically, about a pipeline firm that is one of Canada’s remaining income funds. The company has just made a major overseas acquisition and Pat assesses the potential risk and rewards. ...

This is the latest in a series of video interviews in which Pat McKeough will give his advice on a variety of topics. Some will deal with his overall investment philosophy, others on specific investment strategies and still others will be comments on events that are affecting the markets and the economy. This time, he discusses one of the most venerable of Canadian stocks. A reader asked about CP Rail, Pat’s #1 Stock Pick for 2012, and all of the media attention it’s receiving. Shouldn’t we avoid stocks in the limelight? Not in this case, says Pat, and he explains why.
The Real News About CP Rail...

HEWLETT-PACKARD CO., $22.33, New York symbol HPQ, rose 4% this week after the company unveiled a new restructuring plan. It also reported better-than-expected sales and earnings. Hewlett’s plan mainly involves merging its personal computer and printer businesses into a single division. It will also cut 8% of its workforce over the next two years. The company expects to pay $3.5 billion in severance and other costs. However, these moves should save it $3.0 billion to $3.5 billion annually. Hewlett will put most of these savings toward developing new products and services. It’s particularly interested in fast-growing areas like cloud computing, analytics software (which lets companies track consumer purchasing and other data) and computer security....

ALIMENTATION COUCHE-TARD INC., $40.67, symbol ATD.B on Toronto, recently agreed to buy Norway’s Statoil Fuel & Retail ASA for $2.8 billion U.S. That’s equal to 39% of Couche-Tard’s $7.3-billion market cap. Statoil Fuel has over 1,700 gas stations in Scandinavia and over 550 in Central and Eastern Europe. The company accounts for over 30% of convenience store sales in Norway, Sweden, Denmark, Latvia and Estonia, and is among the top five in both Lithuania and Poland. Norway’s largest North Sea oil producer, government-controlled Statoil ASA, owns 54% of publicly traded Statoil Fuel....

RIOCAN REAL ESTATE INVESTMENT TRUST $27 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 280.8 million; Market cap: $7.6 billion; Priceto- sales ratio: 5.0; Dividend yield: 5.1%; TSINetwork Rating: Average; www.riocan.com) reports that its cash flow rose 14.4% in the three months ended March 31, 2012, to $103 million from $90 million a year earlier. Cash flow per unit rose 5.7%, to $0.37 from $0.35, on more units outstanding. Revenue rose 15.6%, to $274 million from $237 million.

The trust continues to acquire and open new shopping malls and expand existing ones. This was the main reason for the improved results. RioCan’s occupancy rate is a high 96.9%. Moreover, well-established national chains, such as Wal-Mart and Metro, supply 85.7% of its revenue.

RioCan is a buy.

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ENBRIDGE INC. $40 (Toronto symbol ENB; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 785.0 million; Market cap: $31.4 billion; Price-to-sales ratio: 1.6; Dividend yield: 2.8%; TSINetwork Rating: Above Average; www.enbridge.com) owns 100% of Enbridge Gas New Brunswick Inc. (EGNB), which distributes natural gas to 11,000 customers in that province. Enbridge is now expanding EGNB’s system to connect to an additional 30,000 clients.

However, the New Brunswick government recently enacted new regulations that limit the rates that EGNB can charge its customers. That makes it harder for Enbridge to recoup the funds that it has already invested in this business. As a result, the company will write down this investment by $262 million. That’s equal to 24% of the $1.1 billion, or $1.48 a share, that Enbridge earned in 2011.

Enbridge is still a buy.

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WEYERHAEUSER CO. $20 (New York symbol WY; Conservative Growth Portfolio, Resources sector; Shares outstanding: 537.5 million; Market cap: $10.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 3.0%; TSINetwork Rating: Extra Risk; www.weyerhaeuser.com) is a leading maker of forest products, including paper and packaging. The company owns or leases over 20.3 million acres of timberland in the U.S. and Canada. In 2010, Weyerhaeuser converted to a real estate investment trust (REIT). REITs pay little or no income tax, and must pay 90% of their earnings to their shareholders as dividends. Right now, Weyerhaeuser pays a regular quarterly dividend of $0.15 a share, for a 3.0% annualized yield. The company continues to sell less profitable assets: in 2011, it sold $838 million of real estate....

WEYERHAEUSER CO. $20 (New York symbol WY; Conservative Growth Portfolio, Resources sector; Shares outstanding: 537.5 million; Market cap: $10.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 3.0%; TSINetwork Rating: Extra Risk; www.weyerhaeuser.com) is a leading maker of forest products, including paper and packaging. The company owns or leases over 20.3 million acres of timberland in the U.S. and Canada.

In 2010, Weyerhaeuser converted to a real estate investment trust (REIT). REITs pay little or no income tax, and must pay 90% of their earnings to their shareholders as dividends. Right now, Weyerhaeuser pays a regular quarterly dividend of $0.15 a share, for a 3.0% annualized yield.

The company continues to sell less profitable assets: in 2011, it sold $838 million of real estate.

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A bargain is generally regarded as a good thing. What could be a better bargain for investors than buying shares of a stock at lower prices? “Averaging down” is the well-known market tactic by which investors buy more shares of a stock that has come down in price....