Today, I want to continue my review of this good conservative dividend paying stock. I had written a blog awhile ago about stating a portfolio, and so I want to review some of this stocks I talked about. See my site for this blog. I have starting with TransCanada Corp as I just read a review on this stock that said now was a good time to buy it.
In the Insider Buying and Insider Selling report, I see lots of selling and minimal buying. What appears to be happening is a number of officers of the company and CEO are selling off their stock options. In this company, they seem to have more stock options than stock. The amount of actual stock they hold has not really changed much. I do not much like it when insiders have more stock options than stock. However, this negative can be offset by the confidence the company has shown in the stock by increasing the dividends this year.
I noticed that the earnings and cash flow estimates have gone down since I had picked them up initially earlier this year. When I look at the 5 year average P/E ratios, the average low is just over 13 and the average high is just over 16. I get a current P/E of just over 17. A P/E of 17 is a little high, but not overly so. I get a current dividend yield of 4.3% and the 5 year average is 3.8%. So this dividend yield shows a good current price. The current Price/Book Value is less than 80% of the 10 year average, so this is also pointing to a good current price.
I find that the current stock price of $34.86 is 8.5% higher than the current Graham price of $32.12. Over the last 5 years, the stock price has been about 21% higher than the Graham price. A good stock price is at or below the Graham price. However, the relationship of stock price to Graham price is better than normal.
If you are looking at buy signals, the ones are the Price/Book Value ratio and the higher dividend yield. The P/E ratio and the Graham Price do not tell us much. What I find really negative is the very high Accrual Ratio. It is 11.4% and anything higher than 5% is negative.
However, the average analyst recommendations do not agree with me. The recommendations are lots of Strong Buys, Buys and a few Holds. The consensus recommendation would be a Buy. (See my site for information on analyst ratings.) There are a lot of analysts that feel that now is a good time to buy this stock.
If you look at the charts, this stock is very close to the Utilities Index and below the TSX for periods of 6 months, 1 year, 3 years and 5 years. It is only when you look at the stock over the last 10 years, does it beat the TSX and the Utilities. At 10 years, the Utilities Index also beats the TSX index. The thing to note is the indexes only show stock prices. This stock, as most Utilities stock pays a good dividend. In the case of this stock, the dividend over the last 10 years increased total return by over 4% per year.
I do have this stock and I have made a decent return on it since I bought it, but it is not a favorite stock of mine. Tomorrow, I will talk of my favorite, Fortis Inc.
TransCanada’s businesses are organized into two segments: Pipelines and Energy. The Pipelines business is principally comprised of TransCanada’s pipelines in Canada, the United States and Mexico. The Energy business includes power operations, natural gas storage and liquefied natural gas (LNG). Its web site is www.transcanada.com. See my spreadsheet 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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html.
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