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3 Top Stocks in Manitoba

Everyone likes to support a hometown hero and Canada’s provinces boast many success stories. Today, we take a look at a few exciting opportunities based in Manitoba, because there’s more to the province than snow, pot holes, and mosquitoes.

Exchange Income Corporation

Don’t let the name fool you — Exchange Income (TSX: EIF) has nothing to do with the stock exchange, but does reap income. The company is divided into three segments. First off is its aviation division, comprised of Perimeter Aviation, Keewatin Air, Calm Air International, Bearskin Lake Air Service, Custom Helicopters, and Regional One.

Second is its specialty manufacturing division, which is made up of Jasper Tank, Overlanders Manufacturing, Water Blast Manufacturing, Stainless Fabrication, and WesTower Communications. Its final division is its infrastructure company WesTower, which installs and maintains telecommunication towers in Canada and the U.S.

This 10-year-old company run by former premier Gary Filmon, has seen its stock slip a bit due to the underperformance of its WesTower division. Yet Q1 revenue climbed to $257 million from $219 million in Q1 2013. EBITDA came in at $19 million, up from $17 million last year, while net income was a little sparse due to lower margins and higher costs in its WesTower division.

Despite hiccups in the past couple of quarters, the company offers a $1.68 annual dividend. The stock closed Wednesday at $21.93, well below its $26.00 average target price. The stock carries an “outperform” rating.

Manitoba Telecom Services

The once all-powerful Manitoba Telecom Services (TSX: MBT) still maintains a sizable market share in the province, though now its primary competitor is Shaw Communications (TSX: SJR.B)(NYSE: SJR), with the other telecoms claiming minor parts of the TV, internet, home phone, and (to a lesser degree) wireless market share.

Revenue in the previous quarter dropped by $7 million to $401 million during the same period last year. While revenue was down, EBITDA went the other way, earning $147 million ($0.54 per share), up from $128 million ($0.23 per share) during the same time last year. There is also an annual dividend of $1.70.

MTS has been quietly searching for a buyer for its business communications division Allstream. It had a previous bid of $520 million by an Egyptian company, but that was blocked by the government over “security concerns”. If or when Allstream is sold, analysts at RBC Dominion Securities believed last year that it could be the first step towards selling the entire company. If the federal government would allow such an amalgamation, potential buyers could be Telus (TSX: T)(NYSE: TU) or more likely, BCE (TSX: BCE)(NYSE: BCE).

New Flyer Industries

Our final company is Winnipeg-based bus manufacturer New Flyer Industries (TSX: NFI). As cities continue to attempt to be more “green,” investment in transit is usually a key part of the plan. New Flyer has been able to capitalize on this market by offering natural gas-powered and electric vehicles along with its conventional diesel platform. Case in point: New Flyer has recently received an order for 180 CNG buses from BC’s Translink, to be deployed in Metro Vancouver.

During the past quarter, New Flyer delivered 554 buses, up from 490 last year, translating into revenue of $323 million, up from $245 million in the previous year’s quarter. Despite increased income tax payments, net income came in at $5.5 million ($0.10 per share) up from $3.5 million ($0.08 per share) in Q1 2013. The annual dividend on this bus manufacturer is currently paying out $0.59, and carries a yield of 4.7%.

Five more home-grown stock picks

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Fool contributor Cameron Conway does not own any shares in the companies mentioned.

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