transcanada

TRANSCANADA CORP. $36 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 690.0 million; Market cap: $24.8 billion; Price-to-sales ratio: 3.0; Dividend yield: 4.4%; SI Rating: Above Average) recently began pumping crude oil from Alberta to refineries in the U.S. Midwest through the first phase of its $12-billion U.S. Keystone pipeline project. It is now building the second phase, which should begin operating in 2011. TransCanada plans to add a third phase to this project. Called Keystone XL, this new pipeline will supply oil refineries in Texas. U.S. environmentalists and politicians have criticized Keystone XL. In response, TransCanada will reduce the pressure of the oil in the pipeline. That will lower the line’s capacity, but it should help TransCanada secure approval for the project. The company hopes to complete Keystone XL by the end of 2013....

TRANSCANADA CORP. $36.81 (Toronto symbol TRP; Shares outstanding: 689.9 million; Market cap: $25.4 billion; SI Rating: Above Average; Dividend yield: 4.4%) has started pumping oil from Alberta’s oil sands to refineries in Illinois through the first phase of its new Keystone pipeline. The second phase of Keystone will extend to Oklahoma, and should be ready in 2011. The company has already signed contracts with shippers for 83% of Keystone’s capacity. These deals have an average term of 18 years. That cuts the risk of this investment. However, long-term demand for Canadian oil should continue to rise, particularly if the U.S. curtails production in the Gulf of Mexico in response to the BP oil spill....

SUNCOR ENERGY INC., $33.08, Toronto symbol SU, owns 60% of the proposed Fort Hills oil-sands project in northern Alberta. The company received its stake in Fort Hills as part of its August 2009 takeover of Petro-Canada. UTS Energy Corp. (Toronto symbol UTS) and Teck Resources (see below) each own 20% of Fort Hills. Suncor rose 7% this week after French oil company Total S.A. agreed to buy UTS at a substantial premium. UTS’s 20% stake in Fort Hills is the company’s major asset, so the takeover helped unlock some of the project’s value. In light of rising construction costs, Suncor is still deciding whether to go ahead with the project. It expects to make a decision by the end of 2010....

ISHARES DOW JONES CANADA SELECT DIVIDEND INDEX FUND $18.63 (Toronto symbol XDV; buy or sell through a broker) holds 30 of the highest-yielding Canadian stocks. Its selections are based on dividend growth, yield and payout ratio. The weight of any one stock is limited to 10% of assets. The fund’s MER is 0.50%. It yields 4.0%. The fund’s top holdings are CIBC, 7.7%; Bank of Montreal, 6.8%; TD Bank, 5.8%; National Bank, 5.3%; Telus, 5.1%; Manitoba Telecom, 4.7%; Bank of Nova Scotia, 4.6%; Royal Bank, 4.2%; IGM Financial, 4.0%; and TransCanada Corp., 3.5%. The fund holds 60.3% of its assets in financial stocks. Utilities are next, at 23.0%. The top Canadian finance stocks have sound prospects. However, if you invest in this ETF, be sure to adjust the rest of your portfolio so it won’t be overly concentrated in the financial sector....

ISHARES S&P/TSX 60 INDEX FUND $16.78 (Toronto symbol XIU; buy or sell through a broker) (units split 4-for-1 in August 2008) is a good, low-fee way to buy the top stocks and income trusts on the TSX. The units are made up of stocks that represent the S&P/TSX 60 Index, which consists of the 60 largest, most heavily traded stocks on the exchange. Expenses are just 0.17% of assets. Most of the stocks in the index are high-quality companies. However, as it must ensure that all sectors are represented, it holds a few we wouldn’t include, such as Yellow Pages Income Fund. The index’s top holdings are: Royal Bank, 7.5%; TD Bank, 6.1%; Bank of Nova Scotia, 5.2%; Suncor Energy, 5.1%; Barrick Gold, 4.8%; Canadian Natural Resources, 3.9%; Goldcorp, 3.5%; Bank of Montreal, 3.3%; CN Railway, 3.0%; Potash Corp., 2.8%; Manulife, 2.8%; CIBC, 2.7%; Research in Motion, 2.6%; and TransCanada Corp., 2.5%....

ISHARES DEX UNIVERSE BOND INDEX FUND $29.56 (CWA Rating: Income) (Toronto symbol XBB; buy or sell through a broker) mirrors the performance of the DEX Universe Bond Index. This index consists of a wide range of investment-grade Canadian government and corporate bonds with terms to maturity of more than one year. The 310 bonds in the portfolio have an average term to maturity of 8.49 years. The fund’s MER is 0.30%. The bonds in the index are 85.1% government and 14.9% corporate. The fund sticks with high-quality government bonds from issuers such as Canada Housing Trust, Government of Canada and Province of Ontario, plus high-quality corporate bonds from issuers such as Bank of Montreal, TransCanada Pipelines, Bank of Nova Scotia and Bell Canada....

We generally advise against investing in bonds right now, because today’s low interest rates make them unattractive. That’s especially so in light of the potential rise in inflation that may follow the heavy deficit spending and rapid expansion of the money supply that is now underway. However, if you need stable income and want to hold bonds, here are two bond funds that have low fees and high-quality holdings. ISHARES DEX SHORT BOND INDEX FUND $28.97 (CWA Rating: Income) (Toronto symbol XSB; buy or sell through a broker) mirrors the performance of the DEX Short-Term Bond Index....

TRANSCANADA CORP. $36.03 (Toronto symbol TRP; Shares outstanding: 687.0 million; Market cap: $24.8 billion; SI Rating: Above Average; Dividend yield: 4.4%) reported revenue of $2 billion in the three months ended March 31, 2010, down 10.2% from $2.2 billion a year earlier. Revenue fell mostly because of weaker power prices in western Canada, where TransCanada produces electricity. The company’s total earnings fell 4.5% in the quarter, to $328 million from $343 million a year earlier. Lower revenue hurt earnings, as did higher development costs on the Alaska natural-gas pipeline....

There are a number of dates related to the payment of dividends. Several weeks in advance of a dividend payment, a company’s board of directors sets the amount and timing of the proposed payment. The date of that announcement is known as the declaration date. The payable date is the date set by the board on which the dividend will actually be paid out to shareholders....

Brookfield Asset Management, $26.37, symbol BAM.A on Toronto (Shares outstanding: 572.9 million; Market cap: $15.1 billion), is a holding company that mainly focuses on real estate, infrastructure and power generation. Its holdings include interests in Brookfield Renewable Power Fund and BPO Properties, which owns, develops and manages office buildings. Brookfield Asset Management also holds resource investments, including Norbord. Brookfield Asset Management has a complex holding company structure that could make it difficult to spot problems, should they arise. We see the stock as okay to hold, but don’t recommend it for new buying. RioCan, $18.56, symbol REI.UN on Toronto (Units outstanding: 242.0 million; Market cap: $4.5 billion) – see above – is a buy for income and growth....