Brookfield REIT

Brookfield Properties Corporation (NYSE, TSX: BPO) and its Canadian-based subsidiary BPO Properties Ltd. (TSX: BPP) today announced a proposal to create Canada's pre-eminent office real estate investment trust (REIT). Upon conversion, the new REIT, to be named Brookfield Office Properties Canada, will acquire BPP's directly owned office assets in Toronto, Calgary and Vancouver and will also acquire Brookfield Properties' interest in Brookfield Place, widely regarded as the top commercial complex in Canada.

If approved by BPP shareholders, upon closing of the transaction, it is expected that Brookfield Office Properties Canada will pay a special distribution of $1.02 per unit to unitholders and will also begin to pay monthly distributions of $0.0667 per unit (being $0.80 per unit on an annualized basis), double BPP's current quarterly dividend of $0.10 per common share.

Creating the REIT will enhance shareholder value by broadening the investor base to retail and institutional investors and making the entity more suitable for income investors. Brookfield believes that this reorganization will create an opportunity for BPP's assets to be more fairly valued in the public markets.
 
Previous Update: Brookfield REIT

Tim Hortons Boosts Payout

Tim Hortons (THI) brewed up a bigger profit in its latest quarter and is preparing to serve up higher dividends for its shareholders. Tim Hortons will raise its quarterly payout by 30% to $0.13 per share. Based on the new payout, Tim Hortons shares now yield 1.6%. Going forward, Tim Hortons will aim to have a payout ratio of 30% - 35% of earnings.

Nestle Dividend Growth

Nestle, the world's largest food company, is raising its dividend by 14.3% to 1.60 Swiss Francs per share. Nestle demonstrates again that it can consistently deliver strong dividend growth.

RBC's 2009 Results

I was flipping through RBC's 2009 Annual Report yesterday and couldn't believe how significantly the company underperformed versus its internal benchmarks. Specifically, in 2009 RBC had negative earnings growth, had a low return on equity, and paid out almost 80% of its profits as a dividend.

Don't expect a dividend increase from RBC until they improve on these 3 key metrics.

Boardwalk REIT

Paul Gardner, partner and portfolio manager at Avenue Investment Management recommends buying Boardwalk REIT (BEI.un) at $38.72.

"Boardwalk is a great way to play the REIT market. The management team manages their business with precision. Boardwalk's concentration of apartment buildings is in Alberta and Saskatchewan where the economy is growing better than most provinces and is seeing net migration."

Paul Gardner previously recommended buying Boardwalk on February 19, 2009 at $25.12. Investors who followed his advice would have realized a total return of 64% over the past twelve months.

Government Properties

Buy GOV and have the government pay you for a change...

Government Properties Income Trust (GOV) is a real estate investment trust (REIT) listed on the NYSE. GOV was formed to invest in properties that are leased to government tenants. GOV owns 29 properties, 25 of which are leased primarily to the United States Government and four of which are leased to the states of California, Maryland, Minnesota and South Carolina. GOV currently yields 6.8%.

GOV's dividend is currently $1.60 per share annually. You can expect the dividend to grow by 3% annually for the foreseeable future.

GOV is a good investment for Snowbirds looking for a stable income stream in US dollars...

TransCanada Dividend

Oil and gas pipeline company TransCanada (TRP) is increasing its dividend following a 38% jump in fourth-quarter profit. TransCanada declared a quarterly dividend of $0.40 per share for 2010, a 5% increase over the $0.38 per share paid in each of the previous four quarters last year.

"On an absolute basis and also relative to the level of 10-year Government of Canada bond yield, we believe that the shares of TransCanada represent good value trading at current levels. Based on a forward P/E range of 14x to 20x over the past five years, we believe that the current share price represents a solid entry point for a long-term investment." --- Robert Kwan, RBC Capital Markets
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Understanding Brookfield

Brookfield Asset Management (BAM) is an international property, power, infrastructure, investment and asset management company. By investing in Brookfield, you get exposure to several different asset classes as well as some of the best investment talent in the industry. Investors have the option of investing in the parent company or one or more of its subsidiaries. BAM is complex to say the least.

Abbott's 37th Increase

Abbott Labs (ABT) increased its quarterly dividend by 10% to $0.44 per share. Abbott has increased its dividend every year for the past 37 years.

Abbott is a global health care company that produces pharmaceuticals, medical devices, blood glucose monitoring kits, and nutritional health-care products. Abbott generates slightly less than 60% of revenue from pharmaceuticals.

Coke's 48th Increase

The Coca-Cola Company approved its 48th consecutive annual dividend increase, raising the quarterly dividend by 7% from $0.41 to $0.44 per share. This is equivalent to an annual dividend of $1.76 per share, up from $1.64 per share in 2009.

Boardwalk vs CAP REIT

A Tale of Two Apartment REITs

Both Boardwalk and CAP REIT appear similar at first glance, but a little sleuthing reveals major differences between these apartment REITs. Boardwalk is focused in Western Canada while CAP REIT is centered in the GTA. Taking a look at the numbers shows more favourable characteristics for Boardwalk, specifically less debt and a more conservative payout ratio. CAP REIT, on the other hand, has a distribution that is higher than its Adjusted Funds From Operations (AFFO). Investors are lured by CAP REIT's higher yield and lower valuation, but looks can be deceiving.

Boardwalk is trading slightly below its Net Asset Value (NAV) while CAP REIT is trading significantly above NAV. Yield-hungry investors have been ignoring Boardwalk in favour of other higher-yielding names in the sector. Boardwalk has $3.80 in excess cash per unit. Management could use the cash on hand to make acquisitions, raise the distribution or buyback units.

Digging deeper reveals that Boardwalk, despite the lower yield is the better buy.

The Mall REIT

Primaris Retail REIT Overview

• Owns 28 shopping malls in 7 provinces
• 36% of its portfolio is in Ontario, 18% in British Columbia, 18% in Alberta
• Dominant malls in secondary cities (Kelowna)
• Stable income and conservative management
• Spun out from OMERS in 2003

Think Hydro

Generating Stable Income

Power Trusts, such as Brookfield Renewable Power and Innergex Power have favourable long-term investment characteristics and should deliver investors a source of stable income.

Trusts with a large weighting in hydro facilities have the most attractive long-term cash flow profiles in the sector. Hydro generation assets have long expected useful lives (more than 40 years) and require minimal annual capex.

When making an investment in the renewable power sector, investors should focus on asset mix (hydro, wind), geographic location, cash flow profile and contract duration instead of simply looking at distribution yields and trading multiples.

Investment Thesis

- Attractive Sustainable Distributions

- Contracted Revenue Stream

- Long-Life Infrastructure Assets

Rogers ups Dividend

Rogers Communication posted a fourth quarter profit of $310 million, slightly beating analysts' expectations, and declared a 10% increase in its dividend. Rogers now pays an annual dividend of $1.28 per share.

“We believe Rogers has the flexibility to provide the most rapid growth in dividends and have the most significant share repurchase program among its peers over the next several years,” wrote UBS Securities analyst Phillip Huang

Rogers is a cash flow generating machine

Brookfield REIT Update

BPO Properties (BPP) Actively Considering REIT Conversion

The company has stated that the potential of restructuring as a REIT to improve tax efficiency is under very active consideration and a decision in the near future. BPO Properties has the highest-quality office portfolio (98.6%-leased) of any public company or REIT in Canada.


Fabrice Taylor wrote:

BPO is a crown jewel. It owns some of the finest office and commercial real estate in the country, including Bankers Hall in Calgary and First Canadian Place in Toronto. Its tenants are a landlord's dream. They're mostly big banks, insurers and other stable financial institutions, law firms and governments - organizations that all do well even in bad times.


BPO could distribute about $0.90 a unit this year. That translates into a 4.5% yield - not, I submit, a screaming buy even if it does come from one of the finest real estate portfolios in Canada.


What might be more interesting, though, is this scenario: A REIT conversion combined with the parent company selling down its position. It may be an opportune time for Brookfield to raise cash by selling off part of its stake in BPO to the public market, which might appease investors, who tend to prefer liquid stock.

Previous Update: Brookfield REIT

Buffett Shuffles Portfolio

Berkshire Hathaway has revealed in a regulatory filing the stocks that Warren Buffett was busy buying and selling in the final quarter of 2009.

Major Buys:

• Iron Mountain
• Republic Services

Major Sells:

• Johnson & Johnson
• Proctor & Gamble

Concurrent with Berkshire's acquisition of Burlington Northern, Buffett sold his stakes in Norfolk Southern and Union Pacific in the fourth quarter.

Original article by Eric Rosenbaum of TheStreet.com

Diageo: Brands and Dividends

Over time, Diageo has built the strongest portfolio of spirit brands in the world.  Diageo's products are sold in 180 markets around the world. Diageo's broad category range and geographic reach has delivered resilient performance, even during tough economic times. Diageo’s sales are broken down as follows: 33% North America, 30% Europe, 27% International and 10% Asia-Pacific. Diageo also owns 34% of upscale champagne and cognac maker Moet Hennessy, a subsidiary of French luxury goods maker Moet Hennessy-Louis Vuitton. Diageo was formed in 1997, following the merger of GrandMet and Guinness, and is headquartered in London. 

Diageo's Dominant Global Brands:

- Smirnoff is the #1 vodka in the world

- Johnie Walker is the #1 scotch in the world
- Captain Morgan is the #2 rum in the world
- Baileys is the #1 liqueur in the world
- Jose Cuervo is the #1 tequila in the world
- Guinness is the #1 stout beer in the world

Consistent Dividend Growth

Diageo pays two dividends per year: an interim dividend in April and a final dividend in October.

Diageo is a Core Holding for International Exposure, Dividend Growth and Capital Appreciation.

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Cheers to Diageo

U.K.-based Diageo (DEO) has raised its interim dividend by 5%, payable on April 12 to holders of the ADRs. Diageo is arguably the best spirits company in the world. With eight of the world's top 20 brands and unrivalled global distribution scale, the firm generates robust free cash flows and has a wide economic moat. Diageo's most recognized brands include Guinness beer, Smirnoff vodka, Tanqueray and Gordon's gins, Captain Morgan rum, Baileys Irish Cream, and Johnnie Walker scotch.

Shoppers Surprise

Shoppers Drug Mart (SC) surprised a few dividend investors by announcing a dividend of $0.225 per share. This represents an increase of approximately 5%, resulting in an annualized dividend of $0.90 per share. Many dividend investors have lost patience with Shoppers as increases have come to a grinding halt as a result of the uncertainty surrounding the Ontario Government's potential regulatory changes. Many current holders of Shoppers where hoping for a more significant increase given the company's low payout ratio.

Shoppers to Sell Generic Drug Line
Shoppers will soon start stocking generic drugs in a bid to offset potentially pinched margins from government pharmaceutical reforms.

Shoppers Looks Cheap
Investors looking for high-quality laggards should find Shopper’s combination of earnings growth and valuation compelling. Shoppers no longer sports a premium valuation and is trading in-line with U.S.-based Walgreens (WAG).

"We believe that even under worse-case scenarios, SC should trade at a multiple no lower than WAG, a company which SC is superior to in many ways."  --- Perry Caicco, CIBC World Markets

2010 Outlook
Shoppers expects total sales to increase by between 6.0% and 7.0% in 2010. This expectation is underpinned by anticipated same-store sales growth of between 4.0% and 5.0% in pharmacy and 2.75% to 4.25% in the front of the store.

Yellow Pages Conversion

Yellow Pages Plans to Convert and Cut

Yellow Pages Income Fund (YLO.un) announced its plans to convert from an income trust to into a dividend-paying corporation. Yellow Pages will continue with its current distribution ($0.80 per year) until December and then reduce its dividend to $0.65 per year. This represents a decrease of about 19%. Yellow Pages will continue to pay its dividend monthly.

Yellow Pages is a SELL.

Enjoying the Single Life

By Nathan VanderKlippe, Globe and Mail

While the Suncor marriage with Petro-Canada is off to a rocky start, EnCana and Cenovus seem to be enjoying the single life. EnCana, for example, says its cost-trimming efforts have doubled an internal target. That, and some savvy bets on the price of natural gas, allowed it to beat earnings expectations in its first quarter as a pared-down company, and left it with enough money that it will look to acquisitions and 10% growth in 2010 after years of flat production.

Suncor, meanwhile, has been fighting fires both real – it reported its third upgrader blaze in five months this week – and figurative, after executives told shareholders they were disappointed with the company's first quarterly results as a merged entity.

“I scratch my head why would I want to own Suncor as a substantial position when I can get better operating metrics and higher growth out of these other companies that are paying me better dividends,” said Rob Lauzon of Middlefield Capital.

Rogers Reports Next Week

Rogers Reports on February 17 - Expect a Dividend Increase

Vince Valentini, an analyst with TD Securities, expects the country’s biggest wireless operator to announce a dividend increase in the neighbourhood of 20% and a renewed share buyback program.

Jonathan Allen, an analyst with RBC Dominion Securities, estimates that Rogers can continue growing the dividend by 10% per year for the next 5+ years while repurchasing between $1.0-$1.5 billion shares (7%+ shares outstanding).

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RioCan Distribution

There has been a growing concern over the last year that RioCan is over-distributing. According to Neil Downey at RBC Capital Markets, it may take RioCan several years to grow into its current distribution of $1.38 per unit.

Mr. Downey is expecting stronger same-property NOI growth in 2010, more transactional income, and accreation from recent acquisitions.

RioCan's Property Portfolio

RioCan focuses on stable, low-risk retail properties in the six largest Canadian metropolitan areas: Vancouver, Calgary, Edmonton, Toronto, Ottawa and Montreal.

A lot of people are making a big deal about the state of the US Commercial Real Estate market. If you hear the words RioCan and US Real Estate in the same sentence, ignore it. US properties account for less than 1% of RioCan’s portfolio.

RioCan Results

2009 Highlights:

• Acquired 20 properties in Canada and the US
• Acquired an equity investment in Cedar Shopping Centers (a U.S. based REIT)
• Maintained strong occupancy at 97.4%

"RioCan persevered during a very difficult year, which brought challenges to the economy and to the capital markets. Our conservative approach in 2009 resulted in a short-term drag on our profitability, but has enabled RioCan to take advantage of acquisition opportunities in the fourth quarter and set the stage for material growth in FFO going forward." --- Ed Sonshine, RioCan's CEO.

Growth in FFO will result in Distribution Growth over time.

Looking into Sysco

Sysco (SYY) is the largest food distributor in North America. Sysco provides products and services to restaurants, hospitals, schools, hotels and nursing homes. The company operates 186 distribution facilities from which it distributes products such as frozen foods, meats, fruits, vegetables, fully prepared meals and non-food products such as kitchen and cleaning supplies. No single customers accounts for more than 10% of sales. Sysco’s strategy is to grow via acquisition. Since its inception, Sysco has acquired about 150 companies.

Strengths
1. Sysco is the leader in this fragmented industry with a 17% market share. No other competitor has more than 10% of the market.
2. Since becoming a public company in 1970, Sysco has rewarded shareholders with 40 years of consecutive dividend growth.
3. Sysco has a strong balance sheet and has been able to generate a ROE in excess of 30% for most of the past decade.

Weaknesses
1. Low profit margins are the hallmark of this industry. Sysco’s profit margin over the last ten years has averaged around 3%.
2. Restaurants accounted for 62% of Sysco’s revenue last year. Sysco is susceptible to a slowdown in this segment during a weak economy.
3. Sysco is a low beta, defensive stock that lacks torque to the economic recovery. Sysco will most likely be a laggard during a prolonged bull market. Sysco’s earnings are only expected to grow 5-7% per annum.

Investment Rationale
Sysco is a good long-term investment due to its strong defensive characteristics coupled with its leading market share position and strong return on equity. The shares should outperform in a sideways or weak market. Sysco sports an above average dividend yield of 3.6% and has delivered annual dividend increases for the past 40 years. Given that the shares are almost fully valued at current levels, investors can expect a modest total return of 10-15% in the next 12 months. I have a $30 price target on the shares.

Transition Year at Suncor

Suncor Earnings Disappoint: Suncor shares have taken a beating this week as the company reported earnings that were significantly below analyst expectations. It seems that Suncor is having troubles digesting its Petro-Canada acquisition as the company decides which assets to keep or sell. The theme for 2010 will be about realizing the benefits of the merger. Once it finishes that, the board of directors will “start to consider dividend increases beginning next year”, CEO Rick George said.

The analyst community still views Suncor favourably as several analysts are keeping their price targets around $40.

New Innergex

By Richard Blackwell, Globe and Mail

Investors looking for a pure-play, mid-sized Canadian renewable energy company will have another place to put their money, now that Innergex Renewable Energy Inc. and its income trust arm are planning to merge into a single entity. The Quebec-based corporation said yesterday it is combining with Innergex Power Income Fund, a trust in which it holds a 16% stake.

The merged operation, which will use the Innergex Renewable Energy name and stock symbol, will together own 14 hydroelectric plants and three wind farms, in Quebec, Ontario, British Columbia and Idaho. There is also a pipeline of projects under development.

The simplified corporate entity will not only be a larger and more liquid asset for investors, it will also eliminate the trust structure and along with it any worries about the end of tax breaks that many trusts will face in 2011.

"By this transaction we're leaving behind all the uncertainties that were created under the trust structure," chairman Jean La Couture said on a conference call with analysts. Both entities are currently run by the same management group.

In the transaction, the trust's unitholders will get 1.46 of the combined company's shares for each unit they own. The dividend to be paid to those unitholders by the merged company will be roughly equivalent to what they are getting now in distributions. Current shareholders of the corporate entity will see their holdings unchanged, but they will start to collect dividends.

While the combined business will eventually be taxable, the company has access to about $750-million in tax credits which should keep it from having to pay anything until at least 2018.

Hershey Ups Dividend

The Hershey Company (HSY) announced a dividend increase of 7.6% today. Hershey has increased their dividend in 12 of the last 13 years (2009 was the exception). The company reaffirmed its outlook for growth in net sales of 3-5% and an increase in earnings per share of 6-8% for 2010.

January Recap

2010 is off to a great start as several prominent TSX companies have increased their dividend payments to shareholders.

• ATCO: 6.0% increase
• Canadian Utilities: 7.1% increase
• CN Rail: 7.0% increase
• Fortis: 7.7% increase
• Metro: 23.6% increase
• Shaw Communications: 5.0% increase

Keep an eye on Rogers Communications as they are expected to increase their dividend by 10% - 20% when they report on February 17.

Remember: Dividend Investors are not concerned about fluctuating share prices. What we care about is increasing our cash flow from our portfolio year after year.