Income stock and trust Q3 earnings looking good

Money Reporter, MPL Communications Inc.
133 Richmond St.W., Toronto, ON, M5H 3M8. 1-800-804-8846

Canadian equities are gradually improving, according to recent growth in the S&P/TSX Composite Index. The only way to sustain increases in stock and trust prices is for those stocks and trusts to have sustained increases in earnings or cash flows, as the case may be.

On that front, we have good news. Of the income stocks and trusts that we follow and that have a regular fiscal 2013 reporting schedule (i.e. not Just Energy Group (TSX:JE), which has a different year end, and turned a loss of $0.70 per share into a profit of $0.28 per share in its Q3 2013), ten of them have reported their third quarter results. The good news is that eight of the ten show profit increases, some with pretty big percentages.

AltaGas teams up with Japanese firm

The final toll of the recent Typhoon Haiyan is yet to be seen, but it is certain to be a major disaster of historic proportions. We feel for those affected by it.

Typhoon Haiyan brings to mind another recent far-east disaster. In 2011, Japan received the brunt of a triple hit – an earthquake, a typhoon and a nuclear meltdown – all at the same time. The Fukushama disaster led to a prolonged shutdown of nuclear power reactors across Japan.

Since that time, Japan has been trying to replace that lost power, which has turned it into the largest importer of liquefied natural gas – known as LNG – in the world. China, Malaysia and South Korea are also big importers of LNG.

That, of course, has implications for Canada. Energy companies, particularly from the Land of the Rising Sun, have been constructing new LNG export terminals in northwestern British Columbia.

The latest move involves AltaGas Ltd. (TSX:ALA). AltaGas and Japanese oil refiner Idemitsu Kosan Co. Ltd. have teamed up as a joint venture and last week applied to the NEB for a 25-year licence to export LNG from northwestern B.C.

The joint venture is called Triton LNG LP, and proposes to export up to 115 billion cubic feet of LNG annually from either Kitimat or Prince Rupert. Exports from the terminal could begin as early as 2017.

In the third quarter of 2013, AltaGas increased its earnings by 350% to $0.36 per share from $0.08. In nine months earnings are up 69.7% to $1.12 from $0.66 per share. AltaGas is a buy.

Enbridge Income Fund Holdings (TSX:ENF) made $0.36 per share in the third quarter, down a penny from the $0.37 it made in the same quarter in 2012. That’s a 3% decrease. In the first and second quarters, though, earnings were up 11% and 8% respectively, so it’s still ahead on the year.

Brookfield Renewable Energy Partners (TSX:BEP.UN) ran away with the percentage-increase trophy. Funds from operations increased 925% to $0.41 per unit from $0.04 per unit last year in the same quarter. Brookfield remains under a hold recommendation, but we are currently reviewing it.

Northland Power Inc. (TSX:NPI) was no slouch in the percentage-increase category either. Free cash flow per share jumped by 540% to $0.32 per share from $0.05 per share.

Pembina Pipeline Corporation (TSX:PPL) reported a 100% increase in earnings per share. The shipper made $0.22 per share in the quarter versus $0.11 per share last year.

Canadian Apartment Properties REIT (TSX:CAR.UN) increased its net funds from operations (NFFO) slightly in the latest quarter, to $0.440 from $0.435 per unit. That’s a 1% increase.

Canadian REIT (TSX:REF.UN) generated $0.72 in funds from operations per unit, a 7% gain over the $0.67 in FFO per unit it generated in the same quarter in 2012.

RioCan REIT (TSX:REI.UN) increased operating FFO per unit by 2% to $0.41 per unit from $0.40 per unit.

Canadian Oil Sands (TSX:COS) was the other company with lower results in the third quarter. The pure oil sands play made $0.51 per share, down 26% from $0.69 per share in the same quarter last year.

Finally, Enerplus Corporation (TSX:ERF), like Just Energy before it, turned a Q3 2012 loss into a Q3 2013 profit. This quarter ERF made $0.17 per share, reversing a loss of $0.32 per share last year in the quarter.



Best Buys This Month

DAVIS + HENDERSON CORPORATION $27.99 (TSX:DH) If you’re looking to add a business stock or trust to your portfolio, Davis + Henderson is the only one we have as a buy recommendation right now. But this is not just a choice by default. DH has an impressive record of price and dividend increases based on its Canadian operations, and now it’s ramping up its U.S. exposure, which looks tremendously attractive for the future. Yields 4.57%.

CANADIAN OIL SANDS $20.54 (TSX:COS) Also a Best Buy last month at $19.98. As the price of oil-sands crude rises and falls, so rises and falls the price – and the payout – of Canadian Oil Sands. Investors in this company need to accept that fact, and focus instead on where COS is going as production in the WCS Basin continues to expand year after year. Yields 6.82%, and has a bargain PE ratio of just 11.5 times.

ENBRIDGE INCOME FUND HOLDINGS $23.01 (TSX:ENF) As we detailed in the main article on this page, Enbridge Income Fund Holdings made a bit less money in the latest quarter than it did in the same quarter last year. But we also note that earnings are ahead 5.5% in the first three quarters of this year, so this year it could surpass the $1.48 per share it made in all of 2012. Add in the fact that ENF has a PE ratio of just 14.8 times. Yields 6.00%.

Money Reporter, MPL Communications Inc.
133 Richmond St.W., Toronto, ON, M5H 3M8. 1-800-804-8846

Comments are closed.