stock split

CANADIAN UTILITIES LTD. (Toronto symbols CU [class A non-voting] $36 and CU.X [class B voting] $36; Income Portfolio, Utilities sector; Shares outstanding: 258.2 million; Market cap: $9.3 billion; Price-to-sales ratio: 3.2; Dividend yield: 2.7%; TSINetwork Rating: Above Average; www. canadianutilities.com) distributes electricity and natural gas in Alberta and Australia. It also operates 18 power plants in Canada, Australia and the U.K. ATCO Ltd. (see right) owns 52.9% of the company.

In the quarter ended March 31, 2013, Canadian Utilities earned $183 million, down 3.7% from $190 million a year earlier. Earnings per share fell 4.2%, to $0.68 from $0.71. (All per-share amounts adjusted for a 2-for-1 stock split in May 2013.)

Without unusual items, mainly deferred payments from or refunds paid to customers, earnings would have risen 3.4%. Revenue gained 8.0%, to $876 million from $811 million. Colder-than-normal winter weather increased demand for electricity and natural gas. Higher rates in Australia also contributed to the gain.
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As is the case with TransCanada (see page 71), fears of higher interest rates have hurt these four power utilities. However, their high quality, mostly regulated operations will keep giving them plenty of steady cash flows for dividends.

CANADIAN UTILITIES LTD....

TELUS (Toronto symbol T; www.telus.com) has 7.7 million wireless subscribers across Canada. It gets much more of its revenue from wireless than major competitor BCE—54% compared to BCE’s 32%. Telus gets the remaining 46% of its revenue from its traditional phone business, which has 3.4 million customers in B.C., Alberta and eastern Quebec. Telus also has 1.3 million Internet subscribers and 712,000 Telus TV subscribers....

Lululemon Athletica Inc., $66.17, symbol LLL on Toronto (Shares outstanding: 144.6 million; Market cap: $9.6 billion; www.lululemon.com), is a Vancouver-based designer and seller of yoga-inspired athletic wear and accessories. Lululemon first sold shares to the public at $9 each and began trading on Toronto in July 2007 (all per-share figures adjusted for a 2-for-1 stock split in July 2011). Note that the company plans to delist its shares from the Toronto exchange on June 24, 2013. The stock will continue to trade on the Nasdaq exchange under the LULU symbol....

Whole Foods Market Inc., $51.98, symbol WFM on Nasdaq (Shares outstanding: 370.7 million; Market cap: $19.2 billion; www.wholefoodsmarket.com), is the largest retailer of natural and organic foods in the U.S. Whole Foods was founded in Austin, Texas, in 1980, when three local businessmen decided the natural-food industry was ready for a supermarket format. (Note: All per-share amounts, including share price, are adjusted for an upcoming 2-for-1 stock split on May 30, 2013.) Whole Foods sells a selection of perishable foods, mainly natural or organic products. The company also sells mainstream national brands. Its food comes from all over the world, but it focuses on selling goods from local farmers....

TELUS CORP., $37.39, Toronto symbol T, has agreed to buy rival wireless carrier Mobilicity. This privately held company began operating in 2010 and has 250,000 subscribers, mainly in large cities like Toronto, Vancouver, Calgary and Edmonton. To put that in context, Telus has 7.7 million wireless customers across Canada. Like other new entrants into Canada’s wireless market, Mobilicity has had a hard time competing with large, established carriers like Telus. As a result, it is close to bankruptcy....

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 investment advice, including specific stock investing tips. Each Investor Toolkit update gives you a fundamental piece of investing strategy, and shows you how you can put it into practice right away....

Low interest rates continue to spur demand for dividend-paying stocks, such as these two electrical utilities. In the latest issue of The Successful Investor we examine the outlook for each of these Canadian dividend stocks. Both of these companies plan to split their shares on a 2-for-1 basis in May 2013. CANADIAN UTILITIES LTD. (Toronto symbols CU [class A non-voting] and CU.X [class B voting]; www.canadianutilities.com) distributes electricity and natural gas in Alberta. It also operates 18 power plants in Canada, Australia and the U.K. ATCO Ltd. (see below) owns 52.9% of the company....

Canadian National Railway, $101.50, symbol CNR on Toronto (Shares outstanding: 428.4 million; Market cap: $43.5 billion; www.cn.ca), last split its shares two-for-one in February 2006, when they traded at $108. So another share split at today’s price of $101.50 is a possibility. However, we haven’t heard of any plans for a split. You asked how a share split would affect the price of the stock. When a stock splits, your percentage ownership of the company is unchanged—you hold more shares, which are worth less, but you still own the same percentage of the company....

When a company splits its shares, it is simply cutting itself up into a different number of pieces without changing its fundamental value. It simply wants its stock to trade in a price-per-share range that seems reasonable to investors. Mechanics of a split: If a stock’s price rises much beyond $50 a share in Canada (or $100 a share in the U.S.), some investors may shun it, since it seems expensive. The company’s management may then declare a stock split of, say, two for one. This turns one “old” share into two “new” shares. If you owned 100 shares of a $60 stock, you now own 200 shares of a $30 stock. You don’t need to take any action. After a conventional stock split, good news often follows. Companies mainly split their shares when they want to draw attention to themselves—because they expect earnings to rise faster than normal, say. At such times, they may also raise their dividends. However, sometimes companies get overly optimistic. Their profits come in far below expectations, and they can’t keep paying the new, higher dividend. So a stock split can be good or bad, depending on the details....