pension plan

PLEASE NOTE: Next week, Wall Street Stock Forecaster will reveal its #1 pick for 2015. Don’t miss this unique opportunity to profit. INTERNATIONAL BUSINESS MACHINES CORP., $155.87, New York symbol IBM, reported better-than-expected earnings this week. But that’s mainly due to cost cuts, as demand for the company’s mainframes and computer services has weakened. In the three months ended December 31, 2014, IBM earned $5.8 billion, down 13.0% from $6.65 billion a year earlier. Per-share earnings fell 5.7%, to $5.81 from $6.16, on fewer shares outstanding....

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a beginning or experienced investor, these weekly updates are designed to give you specific investment advice. 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: “Your investments gain doubly in your RRSP, but if you lose you take a double loss, so don’t use it as a place to find out if you have a talent for stock trading.”

Registered Retirement Savings Plans or RRSPs are a little like other investment accounts, except for their tax treatment. You can put up to 18% of the previous year’s earned income, maximum $24,930 for 2015, into an RRSP, and deduct it from your taxable income. (The limit is lower for pension plan members.) You only pay taxes on your RRSP investment, and the investment income it earns, when you make withdrawals from your RRSP.

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MANITOBA TELECOM SERVICES INC. $29 (Toronto symbol MBT; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 77.8 million; Market cap: $2.3 billion; Price-to-sales ratio: 1.4; Dividend yield: 5.9%; TSINetwork Rating: Average; www.mts.ca) gets 60% of its revenue from its MTS division, which has 1.3 million telephone and wireless clients in Manitoba. The other 40% comes from Allstream, which sells telephone, Internet and other communication services to businesses across Canada.

In the three months ended June 30, 2014, the company’s revenue fell 1.7%, to $403.3 million from $410.1 million a year earlier.

The MTS division’s revenue rose 1.1%, as strong demand for high-speed Internet and TV services offset lower revenue from traditional telephones. Wireless revenue also fell 4.8%, as smaller carriers continue to develop their own networks, which cuts the roaming fees they pay Manitoba Telecom.

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These two telecom firms face the same regulatory hurdles as Telus (see page 101). But like Telus, they’re improving their services while keeping their operating costs down. That will let them both maintain their high dividend yields, but we prefer BCE for its greater geographic reach. BCE INC. $48 (Toronto symbol BCE; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 827.7 million; Market cap: $39.7 billion; Price-to-sales ratio: 1.8; Dividend yield: 5.1%; TSINetwork Rating: Above Average; www.bce.ca) is Canada’s largest provider of telephone services, with 5.0 million customers in Ontario and Quebec. It also has 2.2 million high-speed Internet customers and 2.3 million TV subscribers. BCE also sells wireless services to 7.8 million customers across Canada, and its Bell Media segment owns CTV Television, specialty channels and radio stations....

PHILIPS ELECTRONICS N.V. ADRs, $32.00, New York symbol PHG, plans to break itself into two separate, publicly traded companies by the end of 2015. One firm will consist of Philips’s lighting solutions business, which accounted for 32% of Philips’s 2013 sales of 22 billion euros (1 euro = $1.42 Canadian). These operations design and build light emitting diode (LED) systems for cities, arenas and other large-scale uses. This new company will not include Philips’s LED components and automotive lighting manufacturing operations, which it plans to set up as a separate firm. Philips still intends to sell a portion of this business, either to the public or to private investors....

GREAT-WEST LIFECO INC. $33 (Toronto symbol GWO; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 998.8 million; Market cap: $33.0 billion; Price-to-sales ratio: 0.9; Dividend yield: 3.7%; TSINetwork Rating: Above Average; www.greatwestlifeco.com) has paid an undisclosed amount for J.P. Morgan Chase’s (New York symbol JPM) pension plan recordkeeping operations.

The deal lets Great-West earn steady fees from these pension funds, and gives it an opportunity to profit from the performance of their investments.

Great-West is a buy.

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TELUS CORP. $40 (Toronto symbol T; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 615.5 million; Market cap: $24.6 billion; Price-to-sales ratio: 2.1; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.telus.com) continues to expand its health care division, which helps doctors, pharmacies and hospitals convert patient records and other information to electronic formats. The company recently paid an undisclosed sum for ZRx Prescriber, an app that lets doctors write prescriptions through their tablet computers and smartphones. The app can also access a patient’s drug insurance information, which speeds up claims and cuts down on errors. Over 520 clinics in Ontario and Quebec use ZRx Prescriber to process 400,000 prescriptions a month. Telus is a buy....

Ottawa continues to impose new rules on Canada’s main wireless firms in an effort to encourage more competition. These measures include restricting the new radio frequencies (or spectrum) they can buy, cutting wireless contract terms from three years to two and capping roaming charges. Meanwhile, new rules will force TV providers to let subscribers buy the channels they want, instead of having to purchase a package....

MANITOBA TELECOM SERVICES INC. $31 (Toronto symbol MBT; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 77.1 million; Market cap: $2.4 billion; Price-to-sales ratio: 1.6; Dividend yield: 5.5%; TSINetwork Rating: Average; www.mts.ca) gets around 55% of its revenue from its 1.3 million telephone and wireless customers in Manitoba.

The remaining 45% comes from Allstream, which sells integrated telephone, Internet and other communication services to businesses across Canada.

The company has suffered a couple of setbacks in the past few months. The first came late last year, when Ottawa blocked its plan to sell Allstream for $405 million to a private firm controlled by an Egyptian billionaire.

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AT&T INC., $35.32, New York symbol T, has agreed to buy DirecTV (Nasdaq symbol DTV), which has 20.3 million satellite TV customers in the U.S. and 18.1 million in Latin America. DirecTV also owns regional sports networks and other cable channels. The company will pay $48.5 billion (70% stock and 30% cash). If you include DirecTV’s debt, the deal is worth $67.1 billion. To put that in context, AT&T’s market cap (the value of all outstanding shares) is $183.5 billion. AT&T expects to close the deal in mid-2015. At that time, DirecTV shareholders will own roughly 15% of the combined company....