transcontinental

TRANSCONTINENTAL INC., $12.40, Toronto symbol TCL.A, is the largest commercial printer in Canada and the third-largest in North America. It also publishes newspapers and magazines. The company plans to pay a special dividend of $1.00 a share on April 26, 2013, to shareholders of record on April 5. That’s in addition to its regular quarterly payout of $0.145 a share, for a 4.7% annualized yield. Meanwhile, Transcontinental earned $28.5 million in its fiscal 2013 first quarter, which ended January 31, 2013. That’s up 5.2% from $27.1 million a year earlier. Earnings per share rose 12.1%, to $0.37 from $0.33, on fewer shares outstanding....

iShares S&P/TSX Canadian Dividend Aristocrats Index Fund ETF, $23.47, symbol CDZ on Toronto (Shares outstanding: 36.9 million; Market cap: $866.0 million; ca.ishares.com), seeks to replicate the performance of the S&P/TSX Canadian Dividend Aristocrats Index. The ETF’s MER is 0.60%, and it yields 3.2%. The S&P/TSX Canadian Dividend Aristocrats Index only includes stocks or trusts that have increased their dividends every year for five years—although it has now changed that to include stocks or trusts that have maintained the same dividend for a maximum of two consecutive years within that five-year period. That means the index excludes a number of sound companies that pay dividends but haven’t increased them every year, including three of Canada’s big-five banks. The ETFs top 10 holdings are AGF Management, 6.4%; Atlantic Power, 4.6%; AG Growth International, 3.8%; Reitmans (Canada), 3.2%; Transcontinental Inc., 3.1%; Exchange Income Corp., 2.8%; IGM Financial, 2.6%; Enbridge Income Fund Holdings, 2.6%; Bird Construction, 2.3%; and Keyera Corp., 2.3%....

TRANSCONTINENTAL INC. $12 (Toronto symbol TCL.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 78.2 million; Market cap: $938.4 million; Price-to-sales ratio: 0.4; Dividend yield: 4.8%; TSINetwork Rating: Average; www.tctranscontinental.com) has paid an undisclosed sum for privately held Groupe Modulo, which publishes Frenchlanguage textbooks for schools and universities across Canada.

Many traditional book publishers have suffered due to rising competition from cheaper e-books. However, specialized textbooks are still highly profitable, and the purchase looks like a nice fit with Transcontinental’s current textbook business: it will expand the company’s catalogue of French-language titles to 11,000 from 8,000.

Moreover, adding Groupe Modulo’s high-quality titles would be a plus for Transcontinental if it decides to expand its own electronic-textbook business.

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CAE INC. $11 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 259.2 million; Market cap: $2.9 billion; Price-to-sales ratio: 1.4; Dividend yield: 1.8%; TSINetwork Rating: Average; www.cae.com) recently sold seven flight simulators and related equipment....

TRANSCONTINENTAL INC. $11 (Toronto symbol TCL.A;Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 78.2 million; Market cap: $860.2 million; Price-to-sales ratio: 0.4; Dividend yield: 5.3%; TSI Network Rating: Average;www.tctranscontinental.com) has amended the terms of its contract to print the San Francisco Chronicle, which runs to 2024.

The newspaper’s print circulation is falling, so it needs fewer copies. To compensate, the Chronicle will pay Transcontinental$200 million U.S.

To put that in context, Transcontinental earned $149.4 million(Canadian), or $1.85 a share, in its 2012 fiscal year, which ended October 31, 2012. That’s down 3.8% from $155.3 million, or $1.92a share, in fiscal 2011. However, revenue rose 6.2%, to $2.1 billion from $2.0 billion, mainly because it bought new printing plants.That offset lower ad revenue at its newspapers, as well as the completion of a big contract to print census forms in 2011.

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PLEASE NOTE: Next week, Wall Street Stock Forecaster, our newsletter that focuses on the U.S. stock markets, will reveal its #1 pick for 2013. SHAWCOR LTD., $40.88, Toronto symbol SCL.A, plans to convert its class A subordinate voting (one vote per share) and class B multiple voting (10 votes per share) shares into a single class of common shares (one vote per share). The company makes sealants and coatings that keep oil and gas pipelines from rusting. It also manufactures industrial products, such as electrical wire and protective sheaths....

TRANSCONTINENTAL INC. $11 (Toronto symbol TCL.A;Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 78.2 million; Market cap: $860.2 million; Price-to-sales ratio: 0.4; Dividend yield: 5.3%; TSI Network Rating: Average;www.tctranscontinental.com) has amended the terms of its contract to print the San Francisco Chronicle, which runs to 2024.

The newspaper’s print circulation is falling, so it needs fewer copies....

TRANSCONTINENTAL INC. $10 (Toronto symbol TCL.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 80.6 million; Market cap: $806.0 million; Price-to-sales ratio: 0.4; Dividend yield: 5.8%; TSINetwork Rating: Average; www.tctranscontinental.com) gets two-thirds of its revenue from its commercial printing business, which is the largest in Canada and the fourth-biggest in North America. The remaining third comes from publishing newspapers and magazines. Transcontinental is also continuing to expand its online operations: it now has over 3,500 websites that attract 18.7 million unique visitors a month.

The company’s exposure to the highly cyclical advertising business adds to its risk. However, over half of its printing revenue comes from long-term contracts that range from three to 18 years.

For example, Transcontinental currently prints a wide variety of magazines and advertising materials for Rogers Communications Inc. (Toronto symbol RCI.B). Rogers recently agreed to extend this contract to 2019. That will add a total of $250 million to Transcontinental’s revenue.

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Consumers continue to rely more on online information sources and less on newspapers and magazines. In response, many publishers are finding new ways to sell their content on the Internet. These three are leading the way, thanks to their strong brands and profitable niche markets. That, along with their ongoing cost cuts, should help them offset lower revenue from their printed products. THOMSON REUTERS CORP. $28 (Toronto symbol TRI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 825.9 million; Market cap: $23.1 billion; Price-to-sales ratio: 1.6; Dividend yield: 4.6%; TSINetwork Rating: Above Average; www.thomsonreuters.com) gets 56% of its revenue and 45% of its earnings by selling news and information to professionals in the banking industry. It also sells specialized information products to clients in the legal, accounting and scientific-research fields. Slow economic growth and tighter regulations are prompting banks and brokerage firms to cut their spending on information products. Thomson Reuters is also spending more to improve the performance of, and add new features to, its Eikon desktop computer terminals, which deliver news and financial data to traders and portfolio managers....

CANADIAN PACIFIC RAILWAY $85.01 (Toronto symbol CP; Shares outstanding: 171.7 million; Market cap: $14.6 billion; TSINetwork Rating: Average; Dividend yield: 1.7%; www.cpr.ca) continues to make progress with its plan to improve its efficiency with new trains and streamlined schedules. The company has just launched its new transcontinental service for intermodal containers (which can be shipped by rail, ship or truck), which uses a more direct route with fewer stops. As a result, CP can now ship containers from Vancouver to Toronto in four days instead of five. Shipping to Chicago also takes four days, down from six. CP Rail is a buy....