merger

Suncor is new to our Conservative Growth Portfolio. We added it last August after it bought Petro-Canada, one of our long-time recommendations. We avoided Suncor before the merger. Its focus on high-cost oil-sands production made it more volatile than other high-quality oil companies, and left it with more to lose if oil prices fell. However, the Petro-Canada takeover diversified Suncor’s operations. As well, cost savings from the merger will help it fund new oil-sands projects and pay down debt. SUNCOR ENERGY INC. $33 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.6 billion; Market cap: $52.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 1.2%; SI Rating: Average) became Canada’s largest oil company when it bought Petro-Canada (old symbol PCA) on August 1, 2009. Petro-Canada shareholders received 1.28 Suncor shares for each Petro-Canada share they held....

MOLSON COORS CANADA INC. (Toronto symbols TPX.A $45 and TPX.B $45; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 185.5 million; Market cap: $8.3 billion; Price-to-sales ratio: 2.7; Dividend yield: 2.1%; SI Rating: Average) is the world’s fifth-largest brewer by volume. Its top brands include Coors Light, Molson Canadian and Carling. The company gets 49% of its gross profit from Canada, followed by the U.S. (41%) and the U.K. (10%). In February 2005, Canadian brewer Molson Inc. merged with U.S.-based Adolph Coors Co. The cost savings from the merger continue to help the company compete with large international brewers....

STANLEY BLACK & DECKER INC. $59 (New York symbol SWK; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 159.4 million; Market cap: $9.4 billion; Price-to-sales ratio: 1.3; Dividend yield: 2.2%; WSSF Rating: Average) is the new name of The Stanley Works after the company recently completed its all-stock purchase of rival toolmaker Black & Decker Corp. Stanley shareholders own 50.5% of the combined company. Black & Decker investors own the remaining 49.5%. Stanley feels that it can find $350 million in annual savings by the end of the third year following the merger. (In 2009, Stanley earned $215.5 million, or $2.68 a share.) Most of these savings will come from combining plants, distribution networks and purchasing systems. However, big mergers like this often come with hidden risks. Stanley Black & Decker is a hold.

TRANSCANADA CORP., $34.78, Toronto symbol TRP, has set aside $22 billion for new growth projects. The company already spent $10 billion of these funds. It will spend the remaining $12 billion over the next four years. TransCanada will invest some of these funds in the Keystone pipeline, which will pump crude oil from Alberta to refineries in Illinois. Keystone should begin operating later this year. The company will also build new natural-gas-fired power plants in Ontario and Arizona. As well, it plans to refurbish reactors at the Bruce nuclear-power station in Ontario (TransCanada owns 48.8% of these reactors), and build new wind farms in eastern Canada....

ATCO LTD. $45 has increased its quarterly dividend by 6.0%, to $0.265 a share from $0.25. The new annual rate of $1.06 yields 2.4%. Buy. CANADIAN UTILITIES LTD. $42 is 52% owned by ATCO, and is ATCO’s main subsidiary. Like its parent, Canadian Utilities is raising its dividend. The new quarterly payment is $0.3775 a share. That’s up 7.1% from $0.3525. The new annual rate of $1.51 yields 3.6%. Buy. MOLSON COORS CANADA INC. $42 earned $3.81 a share in 2009, up 40.6% from $2.71 in 2008 (all amounts except share price in U.S. dollars). Savings from the July 2008 merger of its U.S. brewing operations with those of SABMiller were the main reason for the gain. Revenue fell 36.5%, to $3.0 billion from $4.8 billion. That’s because accounting rules force Molson Coors to recognize only its proportionate share of the U.S. joint venture. Best Buy.

BCE INC., $28.60, Toronto symbol BCE, is starting to see the benefits of its restructuring plan, which began in July 2008. The plan included cutting jobs, relocating employees and selling extra real estate. The restructuring should save the company $400 million a year by the end of this year. In 2009, BCE’s earnings rose 6.5%, to $1.9 billion from $1.8 billion in the prior year. Per-share earnings rose 11.1%, to $2.50 from $2.25, on fewer shares outstanding. These figures exclude restructuring costs and other unusual items. The latest earnings beat the $2.49 a share that analysts were expecting. Revenue rose 0.4%, to $17.74 billion from $17.66 billion. BCE continues to lose residential phone customers to cable and wireless providers. The company now has 6.9 million local telephone subscribers, down 6.1% from the previous year. However, some of these customers are switching to the company’s own wireless service. BCE had 6.8 million wireless subscribers at the end of 2009. That’s a gain of 5.2% over the previous year....

Syngenta AG, $51.89, symbol SYT on New York (ADR) (Shares outstanding: 473 million; Market cap: $24.5 billion), was created by the merger of Novartis Agribusiness and Zeneca Agrochemicals in November 2000. Syngenta is a Switzerland-based firm that makes agricultural chemicals. It specializes in herbicides, fungicides and insecticides. The company also sells high-value commercial seeds that require a great deal of research to develop. Syngenta has customers all over the world. The company sells a broad range of seeds and agricultural products, and is a leader in an industry that is dominated by major global companies, including Dow Chemical and Monsanto....

MOLSON COORS CANADA INC. (Toronto symbols TPX.A $47 and TPX.B $47; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 185 million; Market cap: $8.7 billion; Price-to-sales ratio: 2.9; Dividend yield: 2.1%; SI Rating: Average) is the world’s fifth-largest brewer by volume. Its major brands include Coors Light, Molson Canadian and Carling. The company gets 40% of its sales from Canada, followed by the U.S. (32%) and the U.K. (28%). In other markets, Molson Coors either licenses its brands to local brewers, or exports its beer directly. The company continues to enjoy the benefits of the February 2005 merger of Canadian brewer Molson Inc. and U.S.-based Adolph Coors Co. Canadian shareholders received exchangeable shares in Molson Coors Canada. The Canadian shares carry the same voting and dividend rights as common shares of the U.S. parent company, Molson Coors Brewing Co. (New York symbol TAP).

Lower costs continue to fuel profits

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The J.M. Smucker Company, $61.69, symbol SJM on New York (Shares outstanding: 119.0 million; Market cap: $7.3 billion), is the largest maker of jams, jellies and peanut butter in the U.S. Its top brands include Smucker’s, Jif and Pillsbury. It also makes cooking oil, baking ingredients and juices. Wal-Mart accounts for about 25% of Smucker’s sales. Smucker has grown through acquisitions over the past few years. In 2002, it bought the Jif peanut butter and Crisco shortening and oils businesses from Procter & Gamble in a $1 billion all-stock transaction. In November 2008, Smucker bought the Folgers coffee business from Procter in a similar all-stock deal worth $3.7 billion. Thanks to the Folgers purchase, Smucker earned $140.0 million in its second quarter, which ended October 31, 2009. That’s up 172.1% from $51.5 million a year earlier. Smucker issued common shares for Folgers, so its earnings per share rose just 25.5%, to $1.18 from $0.94. If you exclude merger-related costs, per-share earnings would have risen 20.8%, to $1.22 from $1.01....

THE STANLEY WORKS $52 (New York symbol SWK, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 80.4 million; Market cap: $4.2 billion; Price-to-sales ratio: 1.1; Dividend yield: 2.5%; WSSF Rating: Average) makes a wide variety of hand and power tools for consumer and industrial users. Top brands include Stanley, FatMax and Powerlock. Stanley has agreed to buy rival toolmaker Black & Decker Corp. (New York symbol BDK) for $4.5 billion in stock. Assuming both companies’ shareholders approve, the deal should close in the first half of 2010. Stanley shareholders will own 50.5% of the combined company (to be called Stanley Black & Decker). Black & Decker investors will own the remaining 49.5%. This looks like a good move for Stanley. Black & Decker specializes in power tools, so there’s little overlap with Stanley’s hand tools. Moreover, Black & Decker’s security products, which include door locks and keyless-entry systems, are a nice fit with Stanley’s building-security business....