Telus Corp.

Shaw Communications, $19.48, symbol SJR.B on Toronto (Shares outstanding: 429.8 million; Market cap: $8.4 billion), is the second-largest cable-television operator in Canada. Only Rogers Communications (symbol RCI.B on Toronto) is larger. Shaw’s 2.2 million cable subscribers, located in British Columbia, Alberta, Saskatchewan, Manitoba and northwestern Ontario, represent about 30% of the Canadian cable-television market. Moreover, roughly 70%, or 1.6 million, of them subscribe to Shaw’s Internet services. The company also has 612,000 digital-telephone customers and 879,600 satellite-television subscribers through its ownership of Shaw Direct (formerly Star Choice). In the three months ended February 28, 2009, Shaw’s revenue rose 10%, to $839.1 million from $763.2 million a year earlier. Earnings, excluding one-time items, rose 13.3%, to $128 million, or $0.30 a share, from $113 million, or $0.26 a share. Shaw’s $3-billion long-term debt is a somewhat high 36% of its market cap....

TECK COMINCO LTD., $9.94, Toronto symbol TCK.B, has agreed to sell most of the gold from its Andacollo gold/copper mine in Chile to Royal Gold Inc. (Toronto symbol RGL). Teck owns 90% of Andacollo, and the Chilean government owns the remaining 10%. The mine should begin operating by the end of this year, and reach full production in mid-2010. Teck and the Chilean government will continue to own and operate the mine. Royal Gold is just buying the output. Royal Gold will pay a total of $300 million, consisting of $100 million in cash and $200 million in Royal Gold shares (all amounts except share price in U.S. dollars). Teck’s 90% share is equal to $270 million. To put this amount in context, Teck earned $1.7 billion (Canadian), in 2008. This is equal to $3.76 a share before writedowns and other one-time items....

TELUS CORP. $33.75 (Toronto symbol T.A; Shares outstanding: 335.6 million; Market cap: $11.3 billion; SI Rating: Above Average) plans to spend $500 million this year to improve the speed and reach of its wireless networks in British Columbia. This investment is nearly a quarter of the $2.05 billion that Telus plans to spend on upgrades in 2009. Most of the balance will go to improving its high-speed Internet services and installing equipment related to two large telecommunication contracts with businesses in Ontario and Quebec. Telus’s 2008 cash flow was $2.8 billion, or $8.76 a share. A faster network will help Telus attract and retain more cellphone customers. Telus is Canada’s third-largest wireless service provider, after Rogers and BCE. Moreover, it has to compete with new entrants in the wireless market, which should begin operations later this year. These improvements will also let the company offer more Internet services at greater speeds. This includes faster downloading of videos and music from the Internet....

GENNUM CORP., $3.65, Toronto symbol GND, has agreed to buy Ottawa-based Tundra Semiconductor Corp. (Toronto symbol TUN). Gennum makes equipment that lets TV broadcasters store, manipulate and transport video signals without losing picture quality. Like Tundra, it also makes chips and other components for computer-networking equipment, such as modems and routers. Gennum is paying $86 million in cash and shares for Tundra, 48% more than Tundra’s market cap just prior to the announcement. The cash portion of the purchase price is $55 million, while Gennum shares make up the other $31 million. To put this in context, Gennum earned $22 million U.S., or $0.62 U.S. a share, in its fiscal year ended November 30, 2008. (Although it trades on the Toronto exchange, Gennum reports its results in U.S. dollars.) These figures exclude writedowns of investments and other unusual items. Gennum also held cash of $49 million U.S., or $1.38 U.S. a share, as of November 30, 2008. It has just $1-million U.S. in long-term debt, so it has plenty of room to borrow the extra cash it needs to complete the takeover....

TELUS CORP. (Toronto symbols T $31 and T.A $30; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 317.2 million; Market cap: $10.3 billion; Price-to-sales ratio: 1.0; SI Rating: Above Average) has 4.2 million phone customers and 2.1 million Internet subscribers in Alberta, British Columbia and parts of Quebec. Telus also operates a national wireless service with 6.1 million subscribers. Wireless provides roughly half of Telus’s revenue and earnings. This is a much higher percentage than other Canadian telephone companies. In 2008, Telus’s revenue rose 6.4%, to $9.65 billion from $9.1 billion in 2007. Wireless revenues rose 8.6%, thanks to the growing popularity of smartphones, which let users access the Internet and send and receive email. (Telus charges higher fees for these services than it does for regular voice calls.) Telus also successfully launched Koodo, a new brand aimed at first-time cellphone buyers, in March 2008. Revenue at Telus’s traditional phone division rose 4.4%, mainly on strong demand for high-speed Internet services. Telus’s 2008 earnings fell 10.3%, to $1.1 billion from $1.3 billion in the prior year. Earnings per share fell 6.6%, to $3.51 from $3.76, on fewer shares outstanding. The earnings drop was mainly because of lower taxes in 2007 thanks to one-time income-tax adjustments....

Canada’s telephone companies face growing competition from cable companies and Internet-based phone services. New entrants in the wireless industry will also push the established wireless companies to cut their rates. We feel these four telecom companies will continue to dominate their markets. Steady cash flow from their traditional phone businesses will help them invest in new growth areas, like wireless, and maintain their high dividend yields. BCE INC. $24 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 803.1 million; Market cap: $19.3 billion; Price-to-sales ratio: 1.1; SI Rating: Above Average) has over 7.5 million telephone and Internet customers in Ontario and Quebec. It also has 6.5 million wireless subscribers across Canada....

BANK OF MONTREAL, $27.48, Toronto symbol BMO, earned $225 million in its first fiscal quarter, which ended January 31, 2009, down 11.8% from $255 million a year earlier. During the quarter, the bank issued about $1 billion of new common shares. Consequently, earnings per share fell 17%, to $0.39 from $0.47, on more shares outstanding. However, the latest quarterly earnings included a $359-million (or $0.69 a share) writedown of illiquid securities, including asset-backed commercial paper, held by the bank’s trading division. If you exclude all unusual charges, Bank of Montreal would have earned $1.09 a share. The slowing economy continues to weigh on the bank’s earnings. Loan-loss provisions rose 86.1% in the latest quarter. Most of this increase came from Bank of Montreal’s U.S. operations, particularly loans related to the commercial real estate and manufacturing industries. The U.S. accounts for about 10% of the bank’s revenue. Overall revenue in the quarter rose by 20.5%, to $2.4 billion from $2 billion. Strong gains at the bank’s personal banking operations in Canada and the U.S. offset slow growth at its corporate lending and wealth management businesses. A new high-interest savings account, the launch of the new Tax-Free Savings Account and new credit cards that provide rewards based on use helped the bank lure more customers during the quarter....

Rogers Communications, $34.45, symbol RCI.B on Toronto (Shares outstanding: 635.7 million; Market cap: $21.9 billion), is one of Canada’s largest wireless and cable providers. Rogers has 7.7 million wireless subscribers throughout Canada, and 2.3 million basic-cable subscribers in Ontario and eastern Canada. Rogers also owns assets that include the Toronto Blue Jays and Toronto’s Rogers Centre (formerly the SkyDome). The company has three segments: Wireless, which generates 54% of Rogers’ revenues, Cable (33%) and Media (13%). 1) Rogers Wireless includes the Rogers and Fido brands, which combined account for about 37% of all Canadian wireless subscribers. Wireless offers cellular voice, data and messaging services throughout Canada. It also offers mobile access to the Internet, wireless email, digital pictures and video transmissions....

The Telus Corp. bond is OK to hold if you want to invest in corporate bonds. However, we think you are generally better off investing in Telus’s common shares. The company faces competition from new entrants in the wireless field. However, we think Telus’s strong brands and reputation put it in a position to compete and grow. What’s more, its shares yield 5.5%. Its dividends, unlike bond interest, qualify for the gross-up and dividend tax credit treatment that is normally applicable to dividends from taxable Canadian corporations. So if you hold are in the top tax bracket and you hold Telus shares in your personal taxable account, its 5.5% dividend gives you the same after-tax return as interest of 7.8%. Telus Corp. common shares are a buy....

ISHARES DIVIDEND INDEX FUND $14.89 (Toronto symbol XDV; buy or sell through a broker) currently holds the 30 highest yielding Canadian stocks. Stocks are included in the index based on their dividend growth, yield and average payout ratio. The weight of any one stock in the fund is limited to 10% of the fund’s assets. Its MER is 0.50%. The fund now yields 5.2%. The fund’s top holdings are: CIBC at 7.6%; Bank of Montreal, 6.4%; National Bank, 6.1%; Manitoba Telecom at 5.6%; TD Bank, 5.5%; IGM Financial, 4.8%; Bank of Nova Scotia, 4.4%; Royal Bank, 4.3%; Russel Metals, 4.3%; Telus Corp., 4.1%, TMX Group, 3.5%; and Sun Life Financial, 3.4%....