transcanada

RBC CANADIAN DIVIDEND FUND $48.90 (RBC Funds, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-463-3863; Web site: www.royalbank.com. No load — deal directly with the bank) has 41.4% of its portfolio in Financial services stocks. It has a further 15.9% in Energy stocks. The $8.5 billion RBC Canadian Dividend Fund’s top stock holdings are Royal Bank of Canada, Bank of Nova Scotia, TD Bank, Manulife Financial, CIBC, TransCanada Corporation, Bank of Montreal, Canadian National Railway and Power Corporation. Over the last five years, RBC Canadian Dividend Fund has posted a 13.5% annual rate of return. That’s just over the S&P/TSX 60’s gain of 13.4% over the same period. The fund gained 10.6% over the last year, compared to the S&P/TSX 60’s gain of 15.0%. RBC Canadian Dividend’s MER is 1.72%....

BMO DIVIDEND FUND $50.87 (BMO Mutual Funds, 77 King Street West, Suite 4200, Royal Trust Tower, Toronto, Ont., M5K 1J5, 1-800-665-7700; Web site: www.bmo.com. No load — deal directly with the bank) (CWA Rating: Conservative) currently holds about 58.3% of its portfolio in the Financial services industry. Its largest holding is Energy at 16.1%. BMO Dividend Fund’s largest holdings are Manulife Financial, Bank of Nova Scotia, CIBC, Royal Bank of Canada, Enbridge, Toronto-Dominion Bank, Canadian National Railway, TransCanada Corporation, Imperial Oil, Brookfield Asset Management, Thomson Corporation, BCE Inc. and Sun Life Financial. Over the last five years, the $5.7 billion BMO Dividend Fund has posted a 13.2% annual rate of return. That’s just under the S&P/TSX 60’s gain of 13.4%. The fund gained 9.9% over the last year, compared to a gain of 15.0% for the S&P/TSX 60. BMO Dividend’s MER is 1.73%....

BMO Dividend and Royal Dividend hold mostly high-quality stocks. These stocks sometimes run into deep trouble and go through lengthy struggles, just like lesser investments. Eventually, though, most solve their problems and go on to thrive anew. Both funds hold a high proportion of their assets in financial services stocks. However, if you must focus on something, finance is a relatively stable sector. If you do invest in these funds, be sure to adjust the rest of your portfolio so these funds won’t overly concentrate your holdings in the financial sector....

TRANSCANADA CORPORATION $37 (Toronto symbol TRP; SI Rating: Above average) has raised $1.7 billion in an issue of common shares. The company will use the cash to fund its $3.4 billion U.S. purchase of natural gas pipelines and storage facilities in Texas and several midwestern states. Dilution fears have hurt the stock in the past few weeks. The extra shares will cut the company’s 2007 earnings by roughly $0.05 a share; TransCanada earned $1.90 a share in 2006, excluding unusual items. But the steady cash flow from these new assets will help offset the dilution. TransCanada also received regulatory approval for a crucial part of its Keystone pipeline project, which would transport crude oil from Alberta to the U.S. Midwest. Keystone will cut TransCanada’s reliance on gas pipelines, and help it take advantage of expanding production in Alberta’s oil sands region....

TRANSCANADA CORP. $39 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; SI Rating: Above average) has agreed to buy a natural gas pipeline system that transports gas from Northern Texas and the Gulf of Mexico to several Midwest states for $3.4 billion U.S. The deal also includes several gas storage facilities. This is a sizeable purchase for TransCanada, which earned $1.60 a share (total $782 million) in the first nine months of 2006. It has just $342 million ($0.70 a share) in cash, so it will have to borrow the money it needs. To help maintain its high credit rating and keep interest costs down, TransCanada will probably issue about $1 billion in new common shares. That would increase its number of shares outstanding by 5%....

UNITED CORPORATIONS $69.25 (Toronto symbol: UNC) (165 University Ave., 10th Floor, Toronto, ON M5H 3B8. 416-947-2583. Buy or sell through a broker) invests in a wide variety of average-quality to above-average quality Canadian and foreign stocks. At last report, 33.5% of the fund’s $950.7 million portfolio was invested in Canadian equities, 26.7% in the U.S., 19.6% in Europe, 7.7% in the UK and 10.9% in Asia. The fund’s largest holdings included Bank of Nova Scotia, Royal Bank of Canada, Manulife, Talisman Energy, Algoma Central Corporation, Shell Canada, TransCanada Corporation, Altria Group, TD Bank and Chevron....

CANADIAN PACIFIC RAILWAY LTD. $64 (Toronto symbol CP) expects earnings in 2007 will rise 10% to $4.40 a share. Improving efficiencies should offset slowing coal volumes. Growing demand for other resources like potash should increase 2007 revenue by 5%. Best Buy. ALCAN INC. $57 (Toronto symbol AL) plans to build a new aluminum smelter in South Africa, and has arranged a 25-year electricity supply deal. The energy deal should make it easier for Alcan to bring in partners and offset the $2.7 billion cost (all amounts except share price in U.S. dollars); Alcan earned $461 million or $1.22 a share before special items in the third quarter of 2006. Best Buy. TRANSCANADA CORP. $40 (Toronto symbol TRP) has won a contract to build a new gas-fired power plant west of Toronto. Growing demand for power in this region should help TransCanada quickly recover the $670 million cost of the new plant; it earned $243 million or $0.50 a share before one-time items in its most recent quarter. Best Buy....

ROYAL BANK OF CANADA $53 has invested $25 million U.S. for a 30% stake in a new joint venture that will offer asset management services in China. The amount is just 2% of its latest quarterly earnings. But the deal gives Royal a low-risk way to increase its exposure to a fast-growing market. Buy. EMERA INC. $22 earned $0.18 a share in the third quarter of 2006, up 28.6% from $0.14 a year earlier, due to higher electricity rates and profits from the resale of natural gas from the offshore project near Sable Island. Revenue fell 3.1%, to $272.4 million from $281.1 million, due to the temporary shutdown of a large industrial customer. This customer aims to re-start its operations in the fourth quarter. Best Buy. TRANSCANADA CORP. $38 continues to expand its electrical power operations, which have higher growth prospects than its gas pipeline business. Thanks mainly to higher profits at the power unit, earnings before unusual items in the most recent quarter rose 4.2%, to $0.50 a share from $0.48. Revenue grew 23.3%, to $1.85 billion from $1.5 billion. Best Buy.

Our standing advice on income trusts is to limit them to one-sixth of your portfolio or less. In addition, we mainly recommend trusts that come out of trust conversions aimed at improving shareholder value. We stay out of most new issues, trusts included. In our view, all too many new trust issues were callous attempts at cashing in on investor demand for anything with a high yield. These simple restrictions limited our readers’losses when the new trust rules came out. We think the damage is done, so we recommend the same trusts as before. Note that two of our trust buys are exempt as REITs from the new tax rules....

FORTIS INC. $24 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; SI Rating: Above average) supplies electrical power to around 915,000 customers in five Canadian provinces. It also owns or invests in electrical utilities in New York State, Belize and the Cayman Islands. Its real estate division owns hotels and other commercial properties, mainly in Atlantic Canada. The company has increased its dividend in each of the past 32 years. The current rate of $0.64 a share yields 2.7%. That’s lower than TransAlta, TransCanada and Emera, but we feel that Fortis’s focus on expanding its operations outside of Atlantic Canada should enhance its earnings growth, and let it continue its policy of annual dividend increases. In the second quarter of 2006, Fortis earned $37.9 million, down slightly from $38.2 million a year earlier; per-share earnings remained unchanged at $0.37....