TransCanada Corp 2

I am completing my review of this stock (TSX-TRP) today. This stock is on the Dividend Achievers list at www.dividendachievers.com and also on Mike Higgs’ list at www.dividendgrowth.org/Report.htm. There appears to lots of insider selling on this stock in the past year. Currently, stock options issued are being sold also. This is not a good sign.

According to Globeinvestor, this is a 5 star company. There are ratings on this stock from Strong Buy to Hold. There are a lot of Strong Buys, but the consensus rating is a Buy. (See my site for information on analyst ratings.) No one seems to expect this company to make as much in 2009 as it did in 2008, both in terms of earnings and in terms of cash flow. Things are expected to turn up in 2010. However, no one expected the earnings of $2.52 in 2008 either.

Next, I will look at the ratios of the spreadsheet. The yield is now 5% and the 5 year average is 3.6%, so this is good. Along with this yield, I show payout ratios and they are in line for expected earnings and cash flow for 2009 and 2010. This means that there should be no problem with dividend payments for this stock. The P/E ratios for 2009 and 2010 are expected to be 13 and 11.6, and these are lower than the 5 year average of 15.6. The trailing P/E for 2009 and 2010 are also lower than the 5 year averages for trailing P/E ratios.

The other indicator to look at to see if the current price is good is the Graham Price. The current price of this stock is almost 14% lower than the Graham Price for 2008. The current price is also lower than the potential Graham Price for 2009. The only real concern I have is that the Asset/Liability Ratio is lower than the 5 or 10 year average for this stock.

Looking at the charts, this stock has done better than the TSX and the Utilities Indexes for the periods of 3, 5 and 10 years. The Utilities Index has also done better than the TSX also over these periods. For the 1 year period, this stock is between these indexes and the Utilities Index has done the best. If you look at this stock in the YTD charts, it is between these indexes, but the TSX Index has done the best. If you look at the technical analysis, the stock price has moved lower than the 200 day moving average. This is a long term bearish move.

TransCanada Corp has two business sections of pipelines and energy. It has pipelines are in Canada, the United States and Mexico. Power operations, natural gas storage and liquefied natural gas (LNG) is the energy part of their business. They also have an interest in nuclear power plants (Bruce) in Ontario. Its web site is www.transcanada.com. See my spreadsheet on this company at www.spbrunner.com/stocks/trp.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets.