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Tim Hortons seen serving up a tasty dividend treat

Tim Horton’s has been recruiting for bilingual workers in North Africa for its Moncton stores because of the difficulty of finding local people to work.


RBC Dominion Securities Inc. analyst Irene Nattell is forecasting a double shot of good news from Tim Hortons Inc. tomorrow morning when it reports fourth-quarter results. She expects that not only will the company post robust earnings growth, but will put that dough to work by announcing at least a 15 per cent hike in its annual dividend.

Strong operating results in the quarter will be partly offset by the absence of the bakery joint venture that it sold off in 2010. But Ms. Nattell still expects earnings before interest, taxes, depreciation and amortization growth of 6 per cent, and earnings per share to be up 23 per cent from a year earlier to 63 cents. Her forecast is a penny higher than consensus forecasts.

She now predicts same-store sales in Canada will be up 5 per cent year-over-year, which is up from her previous forecast of 4.5 per cent to reflect higher prices that took affect last April.

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Given Tim Horton's targeted payout ratio of 30 per cent to 35 per cent, she expects the dividend to go up to 78 to 80 cents, from the current 68 cents. That would represent a yield of 1.6 per cent.

Upside: Ms. Nattell raised her price target by $4 to $57 and maintained a "sector perform-average risk" rating.


Canaccord Genuity analyst Keith Carpenter upgraded Mosaic Co. to "buy" from "hold" after the potash producer settled a 19-month legal dispute regarding a federal wetlands permit at its South Fort Meade phosphate mine in Florida. Mosaic offered a few concessions, but in return will have access to an extension of the mine that will provide a further 10 years of phosphate rock production.

Upside: Mr. Carpenter raised his price target by $11 to $73 (U.S.).


The surprise departure of Metro Inc.'s chief financial officer Richard Dufresne is a short-term negative for the company's shares but should not inflict long-term damage to the Metro brand, according to Desjardins Securities Inc. analyst Keith Howlett.

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Mr. Dufresne – who was highly regarded both within Metro and externally by investors – left the company on Monday to assume the same role at George Weston Ltd. in Toronto. It does not appear that Metro will institute a legal challenge to the move, and the other 10 members of Metro's executive management team remain.

Mr. Howlett believes it is likely to take several months for Metro to make a selection from among the internal and external candidates for the vacant CFO position.

Upside: He is maintaining his "buy" rating and $58 (Canadian) price target.


Weak gas prices and lower-than-expected production targets are expected to represent significant headwinds for EnCana Corp.'s stock, according to Raymond James Ltd. analyst Kristopher Zack.

Describing Encana's fourth-quarter results as a "non-event," Mr. Zack noted that the company's 2012 capital expenditure budget was lower than he expected, thereby bringing down the company's production targets.

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Encana is putting an increased emphasis on emerging oil and liquids rich plays – both of which are still considered early stage and will likely not make a meaningful contribution near-term.

Downside: Mr. Zack is maintaining his "market perform" rating but trimming his price by 50 cents to $18.50 (Canadian).


Raymond James Ltd. analyst Frederic Bastien is encouraging investors to lock in their gains in Flint Energy Services Ltd. after shares surged Tuesday on news of a friendly takeover offer from URS Corp. .

URS Corp.'s all-cash offer for the company – which propelled the stock price 66 per cent higher – is expected to position URS as one of the top U.S. energy firms.

He believes the odds of a better bid for Flint are unlikely, given that the deal has been approved by boards of both companies, is getting the thumbs up from many institutional investors, and comes with a hefty break-up fee of $42-million. "Finally, the many other players that can afford Flint already have significant exposure to the energy sector and, we feel, are unlikely to see a need to match URS' rich bid," he said.

Mr. Bastien believes the proposed deal is favourable to Flint shareholders from a valuation perspective and he suggests investors reallocate proceeds to more attractively priced alternatives in the construction sector – especially Bird Construction and Aecon Group .

Upside: Mr. Bastien downgraded Flint from "strong buy" to "market perform" and is increasing his target price by $5 to $25 (Canadian) to reflect URS' offer.

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