EMERA INC. $33 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 123.5 million; Market cap: $4.1 billion; Price-to-sales ratio: 1.9; Dividend yield: 4.1%; TSINetwork Rating: Average; www.emera.com) gets 75% of its revenue and 65% of its earnings from Nova Scotia Power Inc., which is that province’s main electricity supplier. Emera also continues to expand outside Nova Scotia.

The company owns the Brunswick Pipeline, which pumps natural gas from the U.S. to a liquefied natural gas plant in Saint John, New Brunswick. It has also acquired electrical utilities in the U.S. and the Caribbean.

Revenue and earnings have soared

Thanks to these investments, Emera’s revenue jumped 54.1%, from $1.3 billion in 2007 to $2.1 billion in 2011. Earnings shot up 70.5%, from $141.9 million in 2007 to $241.9 million in 2011. Emera sold shares to help pay for its acquisitions. Because of more shares outstanding, earnings per share rose at a slower pace of 56.3%, from $1.28 in 2007 to $2.00 in 2011.

The company is also expanding through joint ventures, which helps cut its risk. For example, in 2009, it teamed up with Algonquin Power & Utilities Corp. (Toronto symbol AQN) to buy the main power utility in Lake Tahoe, California.

Emera recently agreed to sell its 49.999% interest in this utility for additional shares in Algonquin. This will increase Emera’s Algonquin stake to around 25% from 17%.

Emera is also investing in startup projects. It recently agreed to pay $600 million for a 29% stake in a new regulated utility that will transmit power from a plant on Labrador’s Churchill River to the island of Newfoundland. In addition, Emera will spend $1.2 billion to build an undersea cable that will transmit 20% of the plant’s power to Nova Scotia. Emera will own 100% of this cable. These two projects should begin operating by 2017.

Lower coal use will bring benefits

Investments like this are helping Emera cut its reliance on coal, which accounts for about 60% of its power. Using less coal will help the company comply with tougher environmental regulations.

Emera borrowed much of the cash for its recent purchases. That’s why its long-term debt rose from $2.3 billion at the end of 2009 to $3.3 billion on March 31, 2012. That seems high at 80% of its market cap, but high debt loads are common for utilities, as their regulated operations give them predictable cash flows for plant upgrades and new investments.

Warm weather is a short-term setback

The company aims to increase its earnings by 4% to 6% each year. However, warmer-than-usual weather in the past few months has cut power demand. That, along with the extra shares that Emera has issued, will probably cut its 2012 earnings to $1.72 a share. The stock trades at a reasonable 19.2 times that estimate. The $1.35 dividend yields 4.1%.

Emera is a buy.