price to sales ratio
WEYERHAEUSER CO. $49 (New York symbol WY; Conservative Growth Portfolio, Resources sector; Shares outstanding: 211.4 million; Market cap: $10.4 billion; Price-to-sales ratio: 1.9; Dividend yield: 0.4%; WSSF Rating: Extra Risk) is a major North American lumber and paper producer. The company’s shareholders recently approved its plan to convert to a real estate investment trust (REIT). REITs pay little or no income tax. As well, they must pay 90% of their earnings to their shareholders as dividends. Many of Weyerhaeuser’s rivals operate as REITs, so this conversion will give it a tax advantage they now enjoy. Weyerhaeuser will probably convert to a REIT by the end of this year. The company must make a one-time distribution of its retained earnings to its shareholders when it converts. It expects this special dividend to total $6 billion. The IRS requires at least 20% of this payout to be in cash. At the end of 2009, Weyerhaeuser held cash of $1.9 billion, or $9.04 a share, so it should have little trouble meeting this requirement. Weyerhaeuser is a hold.
APACHE CORP. $107 (New York symbol APA; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 336.6 million; Market cap: $36.0 billion; Price-to-sales ratio: 4.1; Dividend yield: 0.6%; WSSF Rating: Average) produces oil and natural gas from properties in the U.S., Canada, the U.K., Australia, Egypt and Argentina. Roughly 50% of its production is oil, and 50% is natural gas. The company is expanding its offshore oil-drilling operations in the Gulf of Mexico, which account for roughly 20% of its production. Offshore drilling is riskier than onshore operations, but Apache has a long history of success in this region.
Big purchases look promising
...
CANADIAN UTILITIES LTD. (Toronto symbols CU (class A non-voting) $47 and CU.X (class B voting) $47; Income Portfolio, Utilities sector; Shares outstanding: 125.9 million; Market cap: $5.9 billion; Price-to-sales ratio: 2.2; Dividend yield: 3.2%; SI Rating: Above Average) distributes electricity and natural gas in Alberta. It also operates 19 power plants: 15 in Canada, two in the U.K., and two in Australia, As well, Canadian Utilities sells engineering services to other utilities. ATCO Ltd. owns 52.3% of the company. Canadian Utilities’ 2009 revenue fell 7.0%, to $2.6 billion from $2.8 billion in 2008, partly due to lower electricity prices in Alberta. But thanks to improving efficiency and regulatory relief, its earnings rose 5.9%, to $3.40 a share (or a total of $427.6 million) from $3.21 a share (or $403.2 million). The company aims to fuel long-term growth with new projects. For example, it will soon begin work on a $1.65-billion power transmission line between Edmonton and Calgary....
TRANSALTA CORP. $22 (Toronto symbol TA; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 218.4 million; Market cap: $4.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 5.3%; SI Rating: Average) operates roughly 80 unregulated power plants in Canada, the U.S. and Australia. Coal-fired plants account for about 57% of the power it generates. Hydroelectric and renewable sources account for 23%, and the remaining 20% comes from natural gas. In November 2009, TransAlta paid $755 million for Canadian Hydro Developers Inc., which owns and operates 21 power-generating facilities in Alberta, B.C., Ontario and Quebec. These include 12 hydroelectric plants, eight wind farms and one biomass plant, which generates power by burning plant materials and wood waste from lumber mills. Adding Canadian Hydro will help TransAlta comply with the tougher environmental regulations that will likely come into force over the next few years. To help pay for this purchase, TransAlta raised $412.5 million by selling 20.5 million common shares for $20.10 each. That increased the total number of shares outstanding by 10%....
EMERA INC. $24 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 113.0 million; Market cap: $2.7 billion; Price-to-sales ratio: 1.8; Dividend yield: 4.7%; SI Rating: Average) owns Nova Scotia Power Inc., which is Nova Scotia’s main electrical-power supplier. Nova Scotia Power supplies 94% of Emera’s revenue. The remaining 6% comes from investments in power companies in the U.S. and Caribbean. Emera is diversifying into other businesses. For example, its Brunswick Pipeline, which carries natural gas from Saint John, New Brunswick, to the U.S. border, began operating on July 16, 2009. The pipeline contributed $14.0 million to Emera’s 2009 earnings. That’s the main reason why its 2009 earnings rose 21.9%, to $175.7 million from $144.1 million in 2008. Emera also benefited from higher power rates in Nova Scotia. Earnings per share rose 20.6%, to $1.52 from $1.26, on more shares outstanding. Revenue rose 10.0%, to $1.5 billion from $1.3 billion....
CANADIAN TIRE CORP. $56 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.6 million; Market cap: $4.6 billion; Price-to-sales ratio: 0.5; Dividend yield: 1.5%; SI Rating: Above Average) sells automotive, household and sporting goods through 479 stores. These account for roughly 65% of its revenue, and 55% of its earnings. Canadian Tire owns 70% of its stores, but franchisees operate all of them. The company also owns other retail chains, including 378 Mark’s Work Wearhouse casual-clothing stores, 273 gas stations (some of which have car washes and convenience stores), and 87 PartSource auto-parts stores. Canadian Tire’s sales rose 18.2%, from $7.7 billion in 2005 to $9.1 billion in 2008. In 2009, sales fell 4.8%, to $8.7 billion. Same-store sales at the main retail division, which includes Canadian Tire and PartSource stores, fell 4.2%. Weak electronics sales offset higher sales of cleaning, kitchen and pet-care goods. As well, a lack of snow in Ontario and Quebec hurt sales of winter merchandise, such as snow shovels....
FORTIS INC. $28 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 170.7 million; Market cap: $4.8 billion; Price-to-sales ratio: 1.3; Dividend yield: 4.0%; SI Rating: Above Average) is the main supplier of electrical power in Newfoundland and Prince Edward Island. It also operates power plants in other parts of Canada, as well as the U.S., Belize and the Cayman Islands. As well, Fortis operates hotels and other businesses in Atlantic Canada. The company has been working to lower its reliance on Atlantic Canada. Much of its growth has come from the assets it bought as part of this plan. In May 2004, Fortis bought regulated electrical utilities in Alberta and B.C. for $1.5 billion in cash and stock. In May 2007, it paid $3.7 billion for the regulated gas-distribution business of Terasen Inc. (formerly called BC Gas), which has 939,600 customers in B.C. Fortis issued $1.15 billion of new common shares to help pay for this purchase....
ATCO LTD. (Toronto symbols ACO.X (class I non-voting) $50 and ACO.Y (class II voting) $51; Income Portfolio, Utilities sector; Shares outstanding: 58.2 million; Market cap: $2.9 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.1%; SI Rating: Above Average) is a holding company. Its main subsidiary is 52.3%-owned Canadian Utilities. ATCO recently reorganized its operations into three main divisions: Utilities (which distributes electricity and natural gas); Energy (which operates power plants); and Structures & Logistics (which provides services to energy-exploration and construction companies). ATCO owns 75.5% of the Structures & Logistics division; Canadian Utilities owns the remaining 24.5%....
Canadian Tire is an example of what you might call a cyclical growth stock. It’s cyclical because its sales generally rise and fall with the economy. But it also has a growth element. Thanks to an aggressive store-renovation plan, its overall sales rose 70% in the past 10 years, even though it operates just 10% more stores. It has also spurred growth by expanding into new businesses, such as clothing, specialized auto parts and financial services. The company now aims to build on this success with a new strategy: It will fuel its long-term growth by focusing on its core products, particularly auto-related parts and services. Canadian Tire feels these moves will increase its annual sales by 3% to 5%, and its annual earnings by 8% to 10%. CANADIAN TIRE CORP. $56 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.6 million; Market cap: $4.6 billion; Price-to-sales ratio: 0.5; Dividend yield: 1.5%; SI Rating: Above Average) sells automotive, household and sporting goods through 479 stores. These account for roughly 65% of its revenue, and 55% of its earnings. Canadian Tire owns 70% of its stores, but franchisees operate all of them....
TORSTAR CORP. $11 (Toronto symbol TS.B; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 79.0 million; Market cap: $869.0 million; Price-to-sales ratio: 0.6; Dividend yield: 3.4%; SI Rating: Above Average) at one time was, like Canadian Tire, a good example of a cyclical growth stock. For decades, ad revenue from The Toronto Star rose and fell with the economic cycle, but generally moved upward. Today, however, some investors feel Torstar is in a long-term or “secular” decline, due to growing competition from free or low-cost news and ads on the Internet. However, the company’s online businesses have offset some of the lost ad revenue at the print division. In January 2010, The Toronto Star’s web site (thestar.com) attracted 37% more unique visitors than in January 2009....