MONTREAL - Power Corporation of Canada (TSX:POW) raised its quarterly dividend by 20 per cent Friday as the holding company reported higher net income despite lower investment gains.

The dividend on Power Corp.'s participating preferred and subordinate voting shares will rise by 4.875 cents per share to 29 cents per share per quarter, or $1.16 on an annualized basis.

Net income was $376 million or 80 per share in the first quarter compared with up from $363 million or 78 per share in the first quarter of 2007, with the increase due to $72 million or 16 cents per share from non-operating earnings at Power Financial, its main subsidiary.

Excluding that contribution, the parent company's operating earnings for the quarter ended March 31, were $304 million or 64 cents per share, compared with $363 million or 78 cents per share in the corresponding period of 2007.

Power attributed the decline in operating earnings to a lower level of income from investments in 2008 compared with 2007 when the corporation had substantial gains from the Sagard 1 Fund in Europe and its QFII operations in China.

The China holdings brought in pre-tax profits of $135 million during the year. Since October 2004, Power Corp. has been one of the rare western businesses accorded the status of qualified institutional investor and was able to invest US $50 million in Class A shares traded on the Shanghai and Shenzhen stock exchanges.

The value of the stock in late 2007 was US $244 million.

The company expects to reinvest now that the markets are down.

"We went a little long on the cash recently and there will be opportunities to buy shares at prices that are a little better," Andre Desmarais, Power's chief executive, said on Friday after the annual shareholders meeting.

In mid-April, the Shanghai Stock Exchange's composite index fell by 50 per cent since its peak last October. It has regained 20 per cent of its value.

Last November, Power went into China as part of a joint venture with Bombardier (TSX:BBD.B) to take advantage of the transport sector's business opportunities.

"Our job was to get Bombardier into China," Desmarais explained. "We did and they always said, 'Listen, eventually, maybe it's your area. . . .In the long term, this is your project'."

Bombardier bought out its participation for US $39 million, more than Power invested initially.

Desmarais said the company is glad it did not invest in asset-backed commercial paper, a short-term type of investment which has been frozen since last summer because of the U.S. mortgage crisis.

"There are often people who want a little more return on a piece of paper and we are not necessarily looking for increased yield," he said. "What we're looking for is strength and liquidity."

The credit crisis has had an impact on investments by Power through Sagard.

"There is a lot of turbulence in the markets at this time," Desmarais said. "There is a slowdown in transactions which may be because the banks are not extending as much credit at this time."

LIKE IT?  LET OTHERS KNOW

Thanks for participating!

Be the first to recommend - Sign in now


See what other people are recommending - Popular Stories