transcanada

TRANSCANADA CORP. $30.15 (Toronto symbol TRP; Shares outstanding: 618.6 million; Market cap: $18.7 billion; SI Rating: Above Average) has signed deals with several natural-gas shippers for its proposed $340-million Horn River pipeline. This new pipeline will run from northeastern British Columbia to TransCanada’s main pipeline system in Alberta. Horn River is scheduled to begin operating in mid-2011. This pipeline will produce steady cash flow for TransCanada for years to come....

These five large funds — one from each of Canada’s big-five banks — have suffered over the last year. That’s because they were heavily weighted toward financial services and resource stocks. Financial services companies are still dealing with tight credit markets. As well, the recession has cut demand for resources. This, in turn, has driven down the prices of resource stocks. We still feel that the best way to profit in the stock market is to stick with high-quality, well-established companies and to spread your money out among the five sectors.You should also ensure your investments are diversified within each sector. These five funds continue to stick to high-quality investments. However, you still should adjust your portfolio to reflect the funds’ high weightings in certain sectors....

CIBC CANADIAN EQUITY FUND $16.61 (CWA Rating: Conservative) (CIBC Securities, 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7. 1-800-631-7008; Web site: www.cibc.com. No load — deal directly with the bank) looks at fundamentals like earnings, cash flow and debt level to identify companies that it sees as having above-average growth potential. The $317.2-million fund’s top holdings are: TransCanada Corp., EnCana, Research in Motion, Bank of Nova Scotia, CN Railway, Potash Corp., BCE Inc., Canadian Natural Resources and Royal Bank of Canada. CIBC Canadian Equity holds 39.4% of its portfolio in resource stocks and 27.1% in finance stocks....

PETRO-CANADA, $34.68, Toronto symbol PCA, jumped 17% this week after it accepted a friendly takeover offer from Suncor Energy Inc. ($29.36, Toronto symbol SU). (Suncor is not related to Philadelphia-based refiner Sunoco Inc., New York symbol SUN.) Under the terms of the deal, Petro-Canada shareholders will get 1.28 common shares of Suncor for each share they own, while Suncor investors will get one share of the new company for each Suncor share they own. Suncor shareholders will own 60% of the combined company, which will be Canada’s largest oil company in terms of market cap. Petro-Canada shareholders will own the remaining 40%. The combined company will operate under the Suncor name. However, the new company will keep using the Petro-Canada banner for its retail gas stations (Petro-Canada has 1,300 stations, while Suncor has roughly 300 that operate under the “Sunoco” banner). It will have proven oil reserves of 3.1 billion barrels, compared to 2.3 billion barrels for Imperial Oil (see below)....

BCE $24.79 (Toronto symbol BCE; Shares outstanding: 791.6 million; Market cap: $19.6 billion; SI Rating: Above Average) earned $1.8 billion in 2008, down 3.9% from $1.9 billion in 2007. Earnings per share fell 3.8%, to $2.25 from $2.34 on more shares outstanding. Revenue fell 0.3%, to $17.7 billion from $17.75 billion. These figures exclude restructuring charges, mainly job cuts, and other one-time items. BCE’s restructuring should cut its annual expenses by $400 million. BCE continues to lose traditional phone customers to cable companies and Internet-based phone services, but these losses are slowing. Meanwhile, BCE’s cellphone business is growing strongly; revenue rose 7.6% in 2008, and its subscriber base grew by 4.5%. The wireless division accounts for 25% of BCE’s revenue and 43% of its profit. Higher demand for BCE’s high-speed Internet and satellite-TV services helped offset lower revenue from its traditional phone services. Despite the lower earnings, BCE raised its quarterly dividend by 5.5%, to $0.385 a share from $0.365. The new annual rate of $1.54 yields 6.2%....

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....

Horizons AlphaPro Managed S&P/TSX 60 ETF, $8.33, symbol HAX on Toronto (Shares outstanding: 960,000; Market cap: $8.0 million), invests in stocks in the S&P/TSX 60 index using research based on technical, cyclical and sentiment indicators provided by Ron Meisels of Phases & Cycles Inc. Meisels contributes a weekly column, called “What the Charts Say” to The Globe & Mail. His research may include moving averages, trend lines, volumes, price patterns and point-and-figure charts. The ETF began trading on Toronto at $9.80 a unit on January 7, 2009. The ETF’s recent top-10 holdings were EnCana Corp. (6.8%), Research in Motion (6.3%), Barrick Gold (6%), Potash Corp. of Saskatchewan (5.2%), Goldcorp (4.5%), Canadian Natural Resources (4.3%), Suncor Energy (3.8%), Rogers Communications (3.7%), TransCanada Corp. (3.2%) and Royal Bank of Canada (2.9%). These holdings gave the ETF this sector breakdown: energy (24.1%), gold (16.2%), financials (13.3%), materials, excluding gold (10.3%), industrials (6.7%), information technology (6.3%), utilities (6.4%), cash (6%), telecommunications (3.7%), consumer discretionary (3.4%), consumer staples (2.6%) and health care (1%)....

TRANSALTA CORP. $21 (Toronto symbol TA; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 198 million; Market cap: $4.2 billion; Price-to-sales ratio: 1.3; SI Rating: Average) operates 50 electrical power plants in North America and Australia. Unlike TransCanada, TransAlta prefers to own unregulated plants. This increases its exposure to sometimes volatile electricity prices. But coal is TransAlta’s main fuel, and its ownership of three coal mines helps keep its costs down. In 2008, TransAlta’s earnings grew 9.8%, to $290 million from $264 million in 2007. Earnings per share rose 11.5%, to $1.46 from $1.31 on fewer shares outstanding. These figures exclude unusual items. Revenue rose 12.1%, to $3.1 billion from $2.8 billion....

TRANSCANADA CORP. $33 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 616 million; Market cap: $20.3 billion; Price-to-sales ratio: 2.2; SI Rating: Above Average) operates pipelines that pump natural gas from Alberta to eastern Canada and the United States. It also owns or invests in 19 electrical power plants. Most of TransCanada’s businesses operate under some form of regulation by government agencies. That limits the prices it can charge, but it also provides steady revenue streams for new investments, debt repayments and dividends. TransCanada just raised its dividend for the ninth year in a row. The new annual rate of $1.52 yields 4.6%. Meanwhile, TransCanada’s earnings before nonrecurring items in 2008 rose 16.3%, to $1.3 billion from $1.1 billion in 2007. Earnings per share rose just 8.2%, to $2.25 from $2.08. That’s because the company issued over $1 billion of new common shares during the year to pay for acquisitions and invest in new projects. Cash flow per share rose 7.2%, to $5.28 from $4.93. However, revenue fell 2.4%, to $8.6 billion from $8.8 billion....

All four of these utility companies have increased their dividends in the past few weeks. We feel their high-quality businesses and strong balance sheets will continue to generate plenty of cash flow for investments in new growth projects and more dividend hikes. TRANSCANADA CORP. $33 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 616 million; Market cap: $20.3 billion; Price-to-sales ratio: 2.2; SI Rating: Above Average) operates pipelines that pump natural gas from Alberta to eastern Canada and the United States. It also owns or invests in 19 electrical power plants. Most of TransCanada’s businesses operate under some form of regulation by government agencies. That limits the prices it can charge, but it also provides steady revenue streams for new investments, debt repayments and dividends. TransCanada just raised its dividend for the ninth year in a row. The new annual rate of $1.52 yields 4.6%....