transcanada

TRANSCANADA CORP. $35 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; SI Rating: Above average) operates a 41,000-km pipeline network that transports natural gas from Alberta to central Canada and the United States. This business supplies 60% of its profit. The remaining 40% comes from its energy division, which owns or operates 23 electrical power plants. The company has increased its dividend every year since 2000. The current annual rate of $1.28 yields 3.7%. In the second quarter ended June 30, 2006, TransCanada’s earnings from continuing operations grew 22.0%, to $0.50 a share (total $244 million) from $0.41 a share ($200 million) a year earlier....

Bonds provide investors with steady income, and preservation of capital. While there’s not as much room for interest rates to fall, higher rates could lead to major losses on fixed-income investments. In our opinion, most income-seeking investors are better off in high-quality, well-managed utility stocks, such as these four. In taxable accounts, these stocks provide roughly as much income as most long-term bonds, after the dividend tax credit. They also give investors the possibility of a capital gain....

UNITED CORPORATIONS $55.40 (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, 36% of the fund’s $970.9 million portfolio was invested in Canadian equities, 25.9% in the U.S., 18.5% in Europe, 7% in the UK and 10.8% 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....

TRANSALTA POWER, L.P. $8.08 (Toronto symbol TPW.UN; SI Rating: Extra risk) owns a 49.99% interest in TransAlta Cogeneration, L.P., which in turn holds interests in five gas-fired cogeneration plants in Ontario, Saskatchewan and Alberta, and in the Sheerness coal-fired plant in Alberta. TransAlta Power has secured long-term contracts for all of its power. Cogeneration is the simultaneous production of power and useful heat from a single fuel source. TransAlta Corp., one of our long-time safety-conscious stocks, owns the remaining 50.01% interest in TransAlta Cogeneration and is responsible for the operation and maintenance of the plants. TransAlta Power’s shares dropped recently after it released its results for the three months ended June 30, 2006. The company made $267,000 or nil per share, down from $3 million or $0.04 a share a year earlier....

PETRO-CANADA $48 (Toronto symbol PCA; Conservative Growth Portfolio, Resources sector; SI Rating: Average) is having trouble nailing down overseas gas supplies for its proposed liquefied natural gas (LNG) terminal in Quebec. That’s what probably prompted the company to offer $113 million U.S. for publicly traded junior oil producer Canada Southern Petroleum Ltd. The price is equal to just 25% of Petro-Canada’s first quarter profits before unusual items. Canada Southern’s undeveloped gas reserves in the Canadian Arctic could help make the LNG plant more economically feasible. Canada Southern has rejected the bid, but Petro-Canada can easily afford to improve on its offer....

RBC DIVIDEND FUND $44.90 (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 43.3% of its portfolio in Financial services stocks. It has a further 17.4% in Energy stocks. The $7.3 billion Royal Dividend Fund’s top stock holdings are Royal Bank, Bank of Nova Scotia, TD Bank, Manulife Financial, CIBC, TransCanada Corp., Bank of Montreal, Petro-Canada and Power Corp. Over the last five years, Royal Dividend Fund has posted a 13.2% annual rate of return. That’s better than the S&P/TSX 60’s gain of 11.2% over the same period. The fund gained 24.9% over the last year, compared to the S&P/TSX 60’s gain of 30.2%. Royal Dividend’s MER is 1.74%....

BMO DIVIDEND FUND $45.82 (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 53.1% of its portfolio in the Financial services industry. Its next-largest holding is Energy at 13.3%. 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, Power Financial, Shell Canada and Sun Life Financial. Over the last five years, the $5 billion BMO Dividend Fund has posted a 13.3% annual rate of return. That’s much better than the S&P/TSX 60’s gain of 11.2%. The fund gained 24.1% over the last year, compared to a gain of 30.2% for the S&P/TSX 60. BMO Dividend’s MER is 1.75%....

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. BMO Dividend and Royal Dividend have both outperformed AIC Diversified Canada over the last year, even though it also has a financial focus. That’s because they hold lots of our favourite high-quality stocks. If you’re looking for income and growth, we prefer these two funds for new buying....

ROYAL BANK OF CANADA $47 (Toronto symbol RY; SI Rating: Above average) is the first of Canada’s five big banks to sell car and property insurance policies over the Internet; it already offers life and travel policies online. In the past, Royal could only provide rate quotes; prospective clients had to contact Royal’s insurance operations separately to buy. The bank hopes Ottawa will soon let banks sell insurance through branches. That would cut Royal’s costs and boost profits. Royal Bank is a buy....

TRANSCANADA CORP. $34 (Toronto symbol TRP; SI Rating: Above average) gets most of its revenue from its gas pipeline systems, but most of its earnings growth in the past few years has come from the 23 electric power plants that it either owns or controls. In fact, TransCanada’s power operations supplied just 32% of its revenue in 2005, but 55% of its income. Thanks to strong gains at both of its main divisions, TransCanada’s profits from continuing operations in the three months ended December 31, 2005 rose 26.3%, to $0.48 a share from $0.38 a year earlier. The most recent quarterly earnings figure excludes a $0.24 a share gain on the sale of an asset. Revenue rose 20.0%, to $1.8 billion from $1.5 billion. One of TransCanada’s most profitable investments in the past few years is its 31.6% stake in four units of Ontario’s Bruce nuclear plant. This single investment accounted for 51% of the power division’s profits in 2005, up from 41% in 2004....