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Investors often think of utilities as dull, boring companies that generate steady profits - but not much excitement.

But try telling that to an Emera Inc. shareholder.

Powered by an aggressive expansion strategy, shares of the company that owns electric utility Nova Scotia Power have delivered an average annualized return - including reinvested dividends - of 14 per cent over the past five years.

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That blows away the 5-per-cent annualized return of the S&P/TSX composite index over the same period. What's more, Emera's growing free cash flow has translated into regular dividend increases, including two hikes in the past year.

How's that for boring?

Based on Emera's 2009 profit of $175.7-million, the company placed 79th in Report on Business Magazine's annual ranking of the Top 1,000 publicly traded Canadian corporations. That's up from 111th place the year before.

And if chief executive officer Christopher Huskilson has anything to say about it, Emera's ranking next year could be higher still. The company is investing up to $3-billion in new and existing businesses over the next few years and aiming for earnings growth of 4 to 6 per cent, he said.

"We'll work hard to try to exceed that, but that's what we think is very realistic," he said. "We've begun … to diversify the business in a pretty big way."



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Five years ago, Nova Scotia Power - a regulated utility that generates, transmits and distributes electricity to most of the province - accounted for more than 90 per cent of Emera's profit. That's dropped to about 60 per cent as Emera diversified with power investments in Maine, Massachusetts, California and the Caribbean.

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Complementing its electricity operations, Emera owns the Brunswick Pipeline and has a minority stake in the Maritimes & Northeast Pipeline. Both supply natural gas to customers in Atlantic Canada and the U.S. northeast.



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But the biggest opportunity for Emera is the shift to renewable energy sources, Mr. Huskilson said. Through investments in wind farms, biomass and other projects, Emera aims to generate 25 per cent of its electricity in Nova Scotia from renewable sources by 2015, up from 10 to 12 per cent now. Currently, coal accounts for about 70 per cent.

"There really is a transformation going on from higher-carbon sources of generation to lower-carbon sources. And our strategy, which we've been following for the last five years, really plays into that change that's happening in our industry," he said.

For investors, stability is a big part of Emera's attraction. The shares sport a dividend yield of more than 4 per cent, and about 95 per cent of Emera's earnings are from businesses that are either regulated or governed by long-term contracts.

"It's a solid company that offers a reasonable dividend yield and modest growth - ideal for choppy markets since the dividend pays you to wait," said John Stephenson, portfolio manager with First Asset Investment Management. He owns the stock in several funds and considers it "fairly valued."

But the stock isn't without risks, he said. To finance expansion and bring its debt-to-capital ratio down to a target of about 60 per cent - it's slightly higher currently - Emera will likely announce an equity issue in the next 12 months, Mr. Stephenson said.

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"The biggest risk is a dilutive equity issue, but I wouldn't be overly concerned about its impact," he said.

Mr. Huskilson said Emera will be turning to debt and equity markets "on a regular basis" to fund capital spending over the next few years. Given its track record of creating shareholder value, the company probably won't have much trouble generating investor interest.



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