Saturday, December 09, 2006

Canadian Stocks Rise On Speculation Banks Will Raise Dividends

Toronto Index higher on the week:

(click on chart for larger image)

Canadian Stocks Rally for a Sixth Day; Banks, Biovail Advance

By John Kipphoff

Dec. 6 (Bloomberg) -- Canadian stocks rose on speculation banks will raise dividends, sending the Standard & Poor's/TSC Composite Index toward its longest winning streak in nine months.

Financial shares such as Canadian Imperial Bank of Commerce gained on speculation they will increase payouts amid higher profits and stable or lower borrowing costs. Biovail Corp. advanced after announcing a special dividend.

The Bank of Canada yesterday kept its benchmark interest rate at 4.25 percent after raising its seven times through July, saying growth in Canada and the U.S. in the current quarter may be ``a little weaker'' than previously forecast.

``I absolutely like dividends,'' said Marc Lalonde, who oversees $1.3 billion at Louisbourg Investments Inc. in Moncton, New Brunswick. ``The banks should do well in a low-yield environment.''

The S&P/TSX Composite Index added 47.73, or 0.4 percent, to 12,943.63 as of 3:06 p.m. in Toronto, extending a record. Six days of gains would be the longest run since a similar period ended in mid-March.

A gauge of financial shares, the biggest by value among 10 industry groups in the S&P/TSX, increased 0.4 percent.

Canadian Imperial added C$1.12 to C$92.98. The nation's fifth-biggest lender by assets is scheduled to report fourth- quarter earnings tomorrow. National Bank Financial analyst Robert Wessel forecast the bank will earn C$1.70 per share before extraordinary items, a 17 percent increase from a year ago.

Analysts expect CIBC and larger rival Bank of Nova Scotia to raise dividends this week. Scotiabank, down 10 cents to C$51.45 today, is due to post its results on Dec. 8.

Toronto-Dominion Bank

Toronto-Dominion, Canada's second-largest bank, increased 45 cents to C$68.05. Larger rival Royal Bank of Canada gained 29 cents at C$54.38. Royal Bank, which unveils its results tomorrow, and Toronto-Dominion, whose earnings are due next week, both raised their payouts last quarter.

Lower or stable borrowing costs boost the value of bonds owned by financial companies and increase demand for loans. Dividend payouts may also become more attractive to investors.

The central bank is expected to keep its benchmark rate unchanged at its next meeting Jan. 16, according to the median forecast of 20 economists surveyed by Bloomberg News.

Biovail jumped C$2.34, or 11 percent, to C$23.90 for the top gain in the S&P/TSX, driving a 3.3 percent gain in a measure of health-care shares.

Canada's biggest publicly traded drugmaker announced a restructuring that will see it repay debt and send more money to shareholders instead of spending more on its sales force and acquiring products.


Biovail declared a special dividend of 50 cents and said it will redeem all 7 7/8 percent senior subordinated notes. It will also triple its regular quarterly dividend to 37.5 cents a share, from 12.5 cents.

The Mississauga, Ontario-based said it will eliminate its U.S. sales force. It promoted Kenneth Howling to chief financial officer, succeeding Charles Rowland, who will take the same job at Endo Pharmaceuticals Holdings Inc.

The moves came as Biovail forecast lower earnings next year, caused by generic competition to its top-selling drug, the anti- depressant Wellbutrin XL.

A gauge of raw-material shares fell 0.9 percent, limiting the advance in the S&P/TSX.

Gold futures for February delivery slid 1.8 percent to $635.90 an ounce in New York.

Goldcorp Inc., Canada's second-largest bullion miner, lost 50 cents to C$34.45. Kinross Gold Corp. eased 21 cents to C$14.31.

The following shares were having unusual price changes. Stock symbols are in parentheses.

Cott Corp. (BCB CN) climbed 57 cents, or 3.8 percent, to C$15.67. The world's biggest maker of store-brand soft drinks was raised to ``buy'' from ``neutral'' by Kaumil S. Gajrawala at UBS AG in New York. The analyst wrote in a note that he believes Cott may be on the verge of a turnaround, thanks to plant closures and workforce reductions, and gains in market share and new customers.

Cascades Inc. (CAS CN) dropped 53 cents, or 3.9 percent, to C$13.20. The paper and packaging products company agreed to pay C$560 million ($491 million) in cash to rival Domtar Inc. (DTC CN) for the 50 percent of Norampac Inc. it doesn't own in their containerboard joint venture. Domtar rose 13 cents, or 1.6 percent, to C$8.35.

Jean Coutu Group Inc. (PJC/A CN) rose 66 cents, or 5.5 percent, C$12.62. Canada's second-biggest pharmacy chain said sales at its Canadian stores open at least a year rose 8 percent in November while sales at its U.S. outlets climbed 2.1 percent.

Synenco Energy Inc. (SYN CN) fell C$1.38, or 8.6 percent, to C$14.61. The tar-sands developer and its Chinese partner more than doubled the expected cost of the mining portion of their Northern Lights oil-sands project in Alberta to C$4.4 billion ($3.84 billion).

To contact the reporter on this story: John Kipphoff in Toronto at .

Last Updated: December 6, 2006 15:10 EST

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