Every Tuesday we bring you “Best Canadian Stocks.” You get our specific recommendation on the stocks we profile, with a full explanation of how we arrived at our opinion. You’ll read about stocks making moves you should know about, from coverage in one of our three newsletters featuring Canadian stocks—The Successful Investor, Stock Pickers Digest and Canadian Wealth Advisor.

We continue to advise against investing in bonds, because low interest rates hurt their appeal, while rising rates would push down their future value. For stable income and growth, we prefer high-yielding utilities. Their dividends also qualify for the dividend tax credit.

ATCO LTD. (Toronto symbols ACO.X [class I non-voting] and ACO.Y [class II voting; www.atco.com) holds 53.2% of Canadian Utilities. It also owns 75.5% of ATCO Structures & Logistics, which builds temporary buildings for construction and energy exploration firms; Canadian Utilities owns the remaining 24.5%.

The company recently agreed to sell its information technology subsidiaries in Canada and Australia. These businesses provide computer support, billing, payment processing and related services to ATCO’s other subsidiaries, as well as outside clients.

The buyer, Wipro Ltd., will pay $210 million when the sale closes later this year. In addition, Wipro will provide computer support and related services to ATCO under a new 10-year contract.

Alberta regulators base ATCO’s power and gas rates on its operating costs and capital investments, so selling the information technology operations will make it easier for its utility businesses to win future rate increases.

Pat McKeough puts a premium on safety in The Successful Investor—and seeks out the hidden value that brings spectacular gains where you least expect them. He finds it where many others fail to look—in well-established dividend-paying stocks. Like the real estate assets whose value Loblaw and Canadian Tire unlocked when it spun those assets into REITs.

You find profitable insights like this in every issue of The Successful Investor. You can begin immediately at a very special price: just $2 a week, or $8 a month. To get The Successful Investor and our weekly Email Hotline updates on stocks making big moves, click here to take advantage of this low-priced offer right away.

Canadian stocks: New start-up project in Australia helps boost revenues

Meanwhile, ATCO’s revenue rose 3.1% in the second quarter of 2014, to $1.11 billion from $1.08 billion a year earlier. The company saw a higher contribution from Canadian Utilities, and revenue at the structures division gained 8.8%, thanks to the start-up a new project in Australia.

However, earnings fell 32.7%, to $66 million, or $0.57 a share, from $98 million, or $0.85. The decline is partly due to the writedown of a power plant in Australia and the negative impact of recent regulatory decisions.

Moreover, unusually high power prices in 2013, caused by unplanned outages at several Alberta coal-fired plants, boosted earnings in the year-earlier quarter and exaggerated the profit drop.

ATCO’s main appeal is its holding company discount. Based on current prices, you can buy an ATCO share for $48 and get roughly $47 worth of Canadian Utilities. That means you get ATCO’s structures business, which provides around 25% of its earnings, for just $1.00.

ATCO trades at 14.4 times the $3.34 a share that it will likely earn in 2014. Its $0.86 dividend yields 1.8%.

The class I (X) non-voting shares are more liquid than the class II (Y) voting shares.

ATCO class I stock is a buy recommendation of The Successful Investor.

If you’re a member of Pat’s Inner Circle and you’d like to ask a question about today’s article or another stock or investment topic, please go to the question page reserved for you (be sure you’re logged in first). Click here to ask your question.

Last week Best Canadian stocks reported on Canada’s biggest independent seller of mutual funds. You can see the article here.