price to sales ratio

FRONTIER COMMUNICATIONS CORP. $9.33 (New York symbol FTR; Income Portfolio, Utilities sector; Shares outstanding: 993.9 million; Market cap: $9.3 billion; Price-to-sales ratio: 1.5; Dividend yield: 8.0%; TSINetwork Rating: Average; www.frontier.com) sells traditional telephone and high-speed Internet services to 5.6 million customers in 27 states. In July 2010, Frontier acquired Verizon’s traditional phone operations in 14 states in an all-stock deal. As a result, Verizon investors now own 68% of Frontier. The stock is up 34% since the merger. It now trades at 19.2 times Frontier’s forecast 2010 earnings of $0.49 a share. That’s a high p/e ratio for a telephone company with no wireless operations. However, the $0.75 dividend seems safe, and yields 8.0%....

WESTERN UNION CO. $19 (New York symbol WU; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 655.9 million; Market cap: $12.5 billion; Price-to-sales ratio: 2.5; Dividend yield: 1.5%; TSINetwork Rating: Above Average; www.westernunion.com) provides money-transfer and foreign-exchange services in over 200 countries. Demand for money transfers continues to rise as the global economy recovers. As a result, Western Union’s cash flow should be around $1 billion for all of 2010. That gives it plenty of room to keep buying back shares; it spent $511.2 million on share repurchases in the first nine months of 2010. (Share buybacks increase per-share earnings and give the remaining shareholders a larger stake in the company.) Western Union recently raised its quarterly dividend by 16.7%, to $0.07 a share from $0.06. The new annual rate of $0.28 yields 1.5%....

NEXTERA ENERGY INC. $51 (New York symbol NEE; Income Portfolio, Utilities sector; Shares outstanding: 418.4 million; Market cap: $21.3 billion; Price-to-sales ratio: 1.3; Dividend yield: 3.9%; TSINetwork Rating: Average; www.nexteraenergy.com) is paying First Solar Inc. (Nasdaq symbol FSLR) an undisclosed sum for four solar-power projects in Ontario. These projects should begin producing electricity in the first quarter of 2011. Solar and wind-power projects are heavily reliant on government subsidies. Governments will likely cut these subsidies as they look for ways to deal with their ballooning budget deficits. Moreover, NextEra gets 70% of its revenue from Florida Power and Light Co., a regulated utility with 4.5 million customers in Florida. This high reliance on a slow-growing state, plus the potential for major hurricane damage, limits NextEra’s appeal....

GENUINE PARTS CO. $51 (New York symbol GPC; Conservative Growth Portfolio, Manufacturing sector; Shares outstanding: 157.5 million; Market cap: $8.0 billion; Price-to-sales ratio: 0.7; Dividend yield: 3.2%; TSINetwork Rating: Average; www.genpt.com) distributes auto parts to over 4,800 independent stores in North America. The company also operates about 1,000 auto parts stores under the NAPA banner. Auto parts account for roughly 50% of its sales, and 55% of its earnings. The company also distributes industrial parts (30% of sales, 30% of earnings), office furniture (15%, 10%), and electrical equipment (5%, 5%). Genuine Parts’ exposure to a variety of businesses helps protect it from slowdowns in certain industries.

54 years of rising dividends

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BHP Billiton’s failed bid for Potash Corp. helped draw investor attention to the fertilizer industry and agricultural commodities, such as wheat and corn. Prices for these agricultural products remain highly volatile, but their long-term outlook is bright. That’s because rising incomes in rapidly developing countries, like India and China, are spurring demand for more and better food. We feel that Agrium offers the best way to profit from rising food demand in these nations. The company is expanding in the Asia-Pacific region, and its growing retail business helps protect it from rapidly changing fertilizer prices. AGRIUM INC. $82 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 158.0 million; Market cap: $13.0 billion; Price-to-sales ratio: 1.3; Dividend yield: 0.1%; TSINetwork Rating: Average; www.agrium.com) makes fertilizers from natural gas at 14 plants in North America and Argentina. Calgary-based Agrium is located near large natural-gas producers in western Canada. As a result, it tends to pay less for its gas than its main competitors in the U.S. The company also makes other fertilizers, such as potash and phosphate, from mines in Ontario, Alberta, Saskatchewan and Idaho....

SAPUTO INC. $37 (Toronto symbol SAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 206.3 million; Market cap: $7.6 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.7%; TSINetwork Rating: Average; www.saputo.com) has fallen from its recent peak of $40 in November 2010. That’s mainly because possible listeria contamination forced it to recall cheese produced at one of its Quebec plants. The same bacteria forced Maple Leaf Foods Inc. (Toronto symbol MFI) to recall meat from its Toronto plant in 2008. However, this recall is much smaller. As well, there have been no reports of illness, so Saputo will likely not have to pay a large class-action settlement, as Maple Leaf did. Saputo continues to grow by purchasing other firms and assets. It is particularly interested in buying dairies in the U.S. and Australia. Growing by acquisition is more risky than internal growth, but Saputo has a long history of cutting costs at its new businesses....

POTASH CORP. OF SASKATCHEWAN $140 (Toronto symbol POT; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 297.6 million; Market cap: $41.7 billion; Price-to-sales ratio: 6.7; Dividend yield: 0.3%; TSINetwork Rating: Average; www.potashcorp.com) has gained 2% since BHP Billiton Ltd. (New York symbol BHP) dropped its hostile, $130.00 U.S.-a-share takeover offer. That’s partly because the company plans to buy back $2 billion U.S. of its shares, probably by the end of 2010. Meanwhile, the company earned $1.32 a share in the three months ended September 30, 2010 (all amounts except share price and market cap in U.S. dollars). That’s up 61.0% from $0.82 a year earlier. Revenue jumped 43.3%, to $1.6 billion from $1.1 billion. Potash Corp. continues to benefit from rising demand for its fertilizers, particularly in India, China and other parts of Asia. The company sold 1.9 million tonnes of potash in the quarter, up 87.1% from a year earlier. The higher sales volumes offset a 21.5% decline in potash prices, to $305.60 a tonne from $389.24....

The Canadian retailing industry is intensely competitive. That’s why we prefer to focus on well-established retailers, such as the five we analyze below. Their high market shares and strong brands give them an edge. As well, all five trade at reasonable multiples to earnings. However, not all are buys right now. LOBLAW COMPANIES LTD. $41 (Toronto symbol L; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 279.5 million; Market cap: $11.5 billion; Price-to-sales ratio: 0.4; Dividend yield: 2.0%; TSINetwork Rating: Above Average; www.loblaw.ca) is Canada’s largest food retailer. It now has around 1,000 company-owned and franchised stores. Loblaw continues to restructure its business, including upgrading its inventory-management systems and streamlining its distribution networks....

TRANSALTA CORP. $21 (Toronto symbol TA; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 219.5 million; Market cap: $4.6 billion; Price-to-sales: ratio: 1.7; Dividend yield: 5.5%; TSINetwork Rating: Average; www.transalta.com) has opened two new wind-power projects (one in Alberta and one in New Brunswick) ahead of schedule and on budget. About 12%, or 1,073 megawatts, of the power TransAlta generates comes from wind. The company continues to add to its renewable-power capacity. That will help it comply with tougher new environmental standards. TransAlta is a buy.

LINAMAR CORP. $20 (Toronto symbol LNR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 64.7 million; Market cap: $1.3 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.2%; TSINetwork Rating: Extra Risk; www.linamar.com) continues to benefit from the recovery of the North American auto industry. The auto-parts maker earned $0.32 a share in the three months ended September 30, 2010. That’s up sharply from $0.02 a year earlier. Sales rose 32.1%, to $556.3 million from $421.1 million. A 36.2% jump in sales of transmissions and other auto parts easily offset a 4.5% decline in sales of other industrial products. Linamar is a buy.