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Torstar Corp.'s David Holland (MARK BLINCH)
Torstar Corp.'s David Holland (MARK BLINCH)

Eye on Equities

Big dividend hike predicted for Torstar Add to ...

Torstar Corp. has some extra cash on hand now that it has completed the sale of its 20 per cent stake in CTV to BCE Inc. , which came months earlier than many expected thanks to quick approvals by both the CRTC and the Competition Bureau.

Proceeds from that deal are estimated at $291.6-million, which comes on top of the $40-million Torstar received at the end of last year for its stake in the Globe and Mail.

A logical conclusion is some of that money will go into the hands of shareholders through a dividend hike, and CIBC World Markets Inc. analyst Robert Bek sees a big one looming on the horizon.

"Currently yielding 2.5 per cent, a doubling of the dividend to levels seen before the recession is possible," Mr. Bek said in a note today. More likely, he believes, is for a more conservative but still hefty dividend bump up of 50 per cent from current levels.

He expects the increase to be announced when the company reports first-quarter results on May 4.

The large cash influx will add to an already under-leveraged balance sheet. Mr. Bek calculates that Torstar will have a 0.4 times net debt to earnings before interest, taxes, depreciation and amortization ratio after receiving the payment for CTV.

Upside: While he has some "structural concerns" relating to Torstar, Mr. Bek said his "conservative valuation" still suggests some modest gains in the stock. He rates Torstar as a "sector performer" with a $15.50 price target.

Cogeco Cable Inc. should see the fastest profitability growth in the Canadian cable industry in the second quarter of fiscal 2011, said Desjardins Securities Inc. analyst Maher Yaghi, who is forecasting Canadian EBITDA growth of 12.6 per cent year-over-year. He also notes the company remains shielded from price competition given its positioning in the Quebec market. "We believe the stock is fundamentally undervalued, with a discounted multiple below that of the Canadian cableco average," he said.

Upside: Mr. Yaghi raised his price target by $2 to $48.

Headwinds are picking up for WestJet Airlines Ltd. because of higher fuel costs, but the company's stock can still gain further altitude thanks to strengthening demand for air travel, said National Bank Financial analyst Cameron Doerksen.

Downside: Mr. Doerksen cut his price target by 50 cents to $17 and maintained his "outperforming' rating.

Nevada Copper Corp. has received all of the advanced exploration permits required to begin development of underground access to the Eastern deposits of its Pumpkin Hollow project in Nevada. This is the first positive step in developing Pumpkin Hollow, noted Canaccord Genuity analyst Wendell Zerb, who believes it will have solid economics at elevated copper prices. A definitive feasibility study is due at the end of the second quarter.

Upside: Mr. Zerb raised his price target to $7.30 from $5.90.

Royal Host Inc. , which restructured from a REIT into a corporate on Jan. 1, is considering hotel property dispositions to raise capital to repay maturing mortgage debt and to fund hotel property improvement plans, noted CIBC World Markets Inc. analyst Brad Sturges. Meanwhile, it has opted to reinvest capital in its hotel properties and to refinance a debt maturity instead of declaring a dividend for the first quarter.

Downside: Mr. Sturges cut his price target by 75 cents to $1.25.

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