These are stories Report on Business is following Monday, March 19, 2012. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.
Apple pays investors Apple Inc. today unveiled its first dividend since 1995, and unveiled a $10-billion (U.S.) share buyback, bowing to pressure to do something for its shareholders.
With cash of almost $100-billion, the tech giant said it would begin with a quarterly dividend of $2.65 in the fourth quarter of this year, while the buyback stretches over three years.
"We have used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure," chief executive officer Tim Cook said in a statement.
"You’ll see more of all of these in the future. Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business. So we are going to initiate a dividend and share repurchase program."
When all is said and done, Apple said, it expects to use some $45-billion of its cash over three years.
David Rolfe, chief investment officer of Wedgewood Investment Partners, which owns about $150-million in Apple shares, told Dow Jones the move was just about what was expected.
"They're generating so much cash; they're still going to have a cash hoard second-to-none," he said.
There are, of course, questions over the amount Apple is shelling out, and whether it should have gone further. Still, analysts boosted their price targets on the shares.
"For a lot of people who own this stock,” Mr. Gillis told Reuters, “some dividend is better than no dividend.”
Hersh Cohen, who co-manages Legg Mason's ClearBridge Equity Income Builder Fund, was hoping for a yield more in the area of 3 per cent, also according to Dow Jones, and thus was "somewhere between surprised and disappointed."
"It's good they're paying a dividend, but I would say this is not a game changer," Mr. Cohen said.
Apple's chief financial officer, Peter Oppenheimer, was asked about the massive amount of money the company holds overseas, responding that it won't bring it back to the United States because of a tax hit it would suffer.
"We think that the current tax laws provide a considerable economic disincentive to U.S. companies that might otherwise repatriate the substantial amount of foreign cash that they have," Mr. Oppenheimer said, noting the company has already expressed that view.
Analysts began hiking their price targets in the wake of the Apple announcement.
RBC Dominion Securities, for example, boosted its target to $675 from $600. Goldman Sachs to $700 from $660, and Morgan Keegan to $800 from $650, according to various reports.
"Apple’s $2.65-a-share quarterly dividend (paying out all U.S. cash flow) to us communicates a confident future, including: 1) strong product pipeline with sustained economics; 2) accelerating growth from markets outside U.S.; 3) $34-billion domestic cash retained for acquisitions and other strategic uses," said RBC's Mike Abramsky.
"We also believe Apple has room to raise its dividend over time (currently 1.8-per-cent yield)."
Housing to remain overpriced Canada's residential real estate market will remain "moderately overpriced and overbuilt" this year, pumped up by continued low interest rates, Toronto-Dominion says in a new forecast.
TD believes average housing prices are overvalued at between 10 per cent and 15 per cent, with centres like Toronto and Vancouver "loftier" than others.
"We expect that the overvaluation will start to unwind once interest rates begin to increase in mid-2013," chief economist Craig Alexander said in his forecast.
"Beginning mid-way through next year and running into 2014, we anticipate a nationwide sales decline of roughly 10 per cent, while housing starts pull back to around 170,000 units. This year, however, we expect both sales and starts to oscillate relatively close to current levels."
There's another side, of course. TD also projects that the debt-to-income ratio among consumers could hit a fresh high of 160 per cent as rates remain near emergency lows. Job creation has stalled and gains in personal disposable income are at a "sub-par rate."
It expects job creation to speed up moderately, but income gains to remain weak, meaning many households will still be using low-cost debt to buy. That's exactly what policy makers have been fretting over increasingly.
"Incidentally, 160 per cent is the level hit in the U.S. and U.K. right before their households got into financial trouble," Mr. Alexander said.
The TD report came just before Canada's bank regulator said it's planning new rules to ensure that banks know enough about a borrower before approving a mortgage.
Viterra in exclusive talks Viterra Inc. says it's now in "exclusive" talks with a potential suitor it did not identify.
"On March 15, 2012, Viterra issued a statement confirming it was aware of press reports speculating about, among other things, the process, parties involved and third parties’ expressions of interest of approximately $16 per Viterra common share," the Canadian agribusiness and grainhandling company said.
"Viterra confirms that it has begun exclusive negotiations with a party and the basis of this exclusive negotiation is at a price which is consistent with our previous statement."
Its previous statement actually warned investors against relying on speculation, but that was enough to get its stock going again.
As The Globe and Mail's Boyd Erman and Paul Waldie have reported, Switzerland's Glencore International PLC is in talks with Canada's Agrium Inc. and Winnipeg's Richardson family, working on a potential bid for Viterra.
- Viterra confirms in exclusive talks
- Quick wrap expected on Viterra auction
- Agrium, Richardson plot Viterra deal
Aveos files for bankruptcy protection Aveos, a Canadian airline maintenance company, has filed for bankruptcy protection, which could send the country's biggest airline scrambling to fill a void.
"As of March 18, 2012 , Aveos ceased its airframe maintenance service operations and will make decisions with respect to its other operations as it seeks court protection to allow it a period of time to assess its options," it said in a statement.
As The Globe and Mail's Brent Jang reports, Aveos plans to lay off up to 2,600 employees and said it's shutting down heavy maintenance functions in Montreal, Winnipeg and Vancouver.
The company is independent to Air Canada , but it does maintenance, repair and other work. Air Canada said its so-called line maintenance has always been done by its own staff.
"Aveos has been providing Air Canada with airframe, engine and component work which, in the case of scheduled maintenance checks, is pre-planned," the airline said.
"The airline is prepared with a contingency plan to ensure continuity of this work and that it will continue to be performed in compliance with all regulatory and legal requirements. Should Aveos not be in a position to perform work, the airline is prepared to make arrangements with a number of other service providers, located primarily in the United States and Canada , with whom Air Canada has longstanding relationships."
- Aveos files for bankruptcy protection, says Air Canada
- Laid-off Aveos workers block entrance to Air Canada building in Montreal
Analysts boost outlook for BCE Analysts are starting to tinker with their price targets for shares of BCE Inc. in the wake of Friday's blockbuster deal for Astral Media Inc. .
The Canadian telecommunications giant is offering $50 a share, or about $3-billion for the Montreal-based media concern.
"We view the Astral acquisition favourably from both a strategic and financial standpoint," said Maher Yaghi of Desjardins, who hiked his stock target to $43.120 from $43, not a big move, but it's something.
"The acquisition better positions BCE to deliver in TV and wireless going forward, while being accretive to [earnings per share]and free cash flow immediately."
What to watch for this week Statistics Canada is expected to report Friday that inflation picked up somewhat in February, driven by higher gas prices. Economists believe Canada's annual inflation rate rose in February to about 2.6 per cent or 2.7 per cent, with prices rising 0.4 per cent or 0.5 per cent in February alone. The overall pace of inflation was 2.5 per cent in January. The so-called core inflation rate, which strips out volatile items, is projected to be 2.2 per cent, up from 1.1 per cent.
"In January overall consumer prices rose a strong 0.4 per cent reflecting gasoline prices rising 2.8 per cent after seven months of decline as crude oil prices have started to move higher out of concern about supply disruptions in the Middle East," said Paul Ferley and Tom Porcelli of Royal Bank of Canada.
"Weekly gasoline price surveys suggest that this pressure continued in February with the rate of increase for this component strengthening to 3.7 per cent."
We'll get the latest provincial budgets from Quebec tomorrow and Saskatchewan on Wednesday.
"In its fall update, the province of Quebec penciled in a $1.5-billion deficit for the upcoming fiscal year (a relatively modest 0.4 per cent of GDP), down from $3.8-billion in fiscal year 2011-2012," said Robert Kavcic of BMO Nesbitt Burns.
"With an election likely looming in the near term, the province might not be as adamant to wield the axe as some other provinces, or the federal government," Mr. Kavcic said in a report.
"To be fair, Quebec has already done significant fiscal repair work, lifting the QST by 2 percentage points, hiking user fees and restraining spending growth. Meantime, the province of Saskatchewan boasts one of Canada’s most enviable fiscal positions, with a $353-million (0.5 per cent of GDP) surplus projected for fiscal year 2011-2012. Resource revenues will no doubt be a major factor in this budget (they made up 25 per cent of total at last check), but don’t expect a free-spending document like the one tabled by fellow resource heavyweight Alberta."
In the markets, there will be several quarterly reports worth watching, including those from Oracle Corp., Tiffany and Co., New Flyer Industries Inc., FedEx Corp., Lululemon Athletica Inc. and Nike Inc.
- Kevin Carmichael's Economy Lab: Bernanke's lesson in confidence building
- UPS buying rival TNT for $6.8-billion
- Starbucks opening Evolution Fresh juice store