pengrowth

CANADIAN UTILITIES LTD. $38 will pay a special dividend of $0.25 a share in September 2006. It has also increased its regular quarterly dividend 1.8%, from $0.285 a share to $0.29. The new annual rate of $1.16 yields 3.1%. Buy. PENGROWTH ENERGY TRUST $24 earned $0.41 a unit in the first quarter of 2006, up 10.8% from $0.37 a year earlier, while cash flow per unit rose 7.3%, to $0.88 from $0.82. Although oil prices rose 22%, Pengrowth’s total production remained unchanged, as acquisitions of new properties offset maintenance slowdowns and asset sales. Excluding acquisitions, Pengrowth’s average daily production in 2006 should grow to around 56,500 barrels per day, up 3% from its earlier forecast. Buy. FORTIS INC. $21 earned $0.35 a share (total $36.6 million) in its first quarter, down 12.5% from $0.40 a share ($39.2 million) a year earlier. If you disregard a one-time gain of $7.9 million in the year-earlier quarter, Fortis’s earnings would have grown 17%, thanks to higher power rates in Western Canada. Revenue grew 2.4%, to $390.8 million from $381.8 million. Buy.

In evaluating investments, many investors focus on what we’d call ‘investment outputs’, such as earnings, dividends, cash flow, return on equity, sales growth and so on. These are all important, of course, but you shouldn’t focus on them to the exclusion of what you might call ‘investment inputs’, such as the factors we use in assigning our Successful Investor quality ratings. Investment inputs are harder to work with than investment outputs, since it takes a judgment call to determine their risk or value. To give you a better idea of what we mean, here’s a list of a dozen investment inputs that we look at before recommending an income trust:...

PENGROWTH ENERGY TRUST (Toronto symbols PGF.A $28 and PGF.B $23; SI Rating: Average) owns all or part of several oil and gas properties in Alberta and B.C. Properties that Pengrowth operates account for 55% of its production. The remaining 45% comes from minority investments in other energy projects, including an 8.4% interest in the Sable Offshore Energy Project south of Nova Scotia. Pengrowth prefers to focus on proven properties with sizeable reserves. It also sticks mainly to conventional oil and gas properties, instead of more risky types of investments like oil sands. Conventional assets supply 80% of Pengrowth’s production, while heavy oil and natural gas liquids supply the other 20%. That gives it more stable cash flows, and keeps its operating costs down. Due to bad weather and a shortage of drilling equipment, Pengrowth’s capital spending in 2005 fell slightly, to around $1.15 a unit. Since Pengrowth will shift most of this work to 2006, capital spending will likely rise to roughly $1.45 a unit....

We advise you to use caution when investing in income trusts, and to limit your trust investments to no more than one-sixth of your total portfolio. Many income trusts, particularly those that have been assembled and sold to the public as new issues in the past few years, come with hidden risks that can eventually hurt their profits and force them to cut their distributions. When that happens, unit prices plummet. In choosing income trusts to recommend, we look beyond high current yields and weigh the quality of a trust’s assets. In trusts as in stocks, it’s crucial to make sure you are investing in an attractive business with healthy long-term prospects and the ability to survive the inevitable setbacks that periodically come to every business....