I would like to talk about this stock (TSX-TRP) today, as the 2009 annual report is in and I own this stock. I bought this stock initially in 2000 and I bought more in 2006. Overall, I have made 11.8% per year, including dividends, on this stock. For the stock I bought in 2006, I have made just over 7% per year. The 2006 purchases is less than 5 years old, and we are just coming out a recession, so the return on this purchase is not surprising.
This stock is on the dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices). I bought the stock in 2000 at an opportune time. The company had been cutting their dividend payments in order to re-organize and get the company into shape for long term profitability. This company’s stock fell hard because of this. People who depend on dividends for their income can be an unforgiving lot, and get really upset at company when a trusted company cuts dividends.
The last two years has not been a great time for this company. They have lost ground in Revenues, Earnings and Cash Flow. For example, the 5 and 10 year growth figures for earnings are -.1% per year and 4.3% per year, respectively. When we look at revenue, this is also not a happy story. Since the company has been selling common shares to increase the number outstanding by about 12% per year, there is a difference between revenue growth and revenue per share growth. The 5 year growth in Revenue is 12% per year. However, the 5 year growth in Revenue per Shares is only 4.5% per year.
The bright spot is the 5 year growth in dividends, and this is 5.3% per year. The 10 year growth is, much lower, at 3% per year. The 10 year growth is lower because of the dividend decease in 2000. However, there is talk that this company may not be increasing their dividends anytime soon because of the purchase of a generating station in Queens, New York. Analysts, however, are saying positive things about this purchase. The company did increase that dividends in 2009, and they have increased their dividends every year since 2001.
The other bright spot is the growth in Book Value and the 5 and 10 year growth figures are 11.2% per year and 8.3% per year, respectively. The total return growth is also good over the last 5 and 10 year periods, coming in at 8% per year and 17% per year, respectively. When I look at the balance sheet, the Liquidity Ratio at 0.64 is low, but the Asset/Liability Ratio at 1.63 is very good. When I look at the Return on Equity, this has continued to be good. For example, the ROE of 2009 was 11.6% and the 5 year average is 12.7%.
I intend to keep the shares in this company I have. I will not be adding to this for the simple reason that this stock is already a good percentage of my portfolio. I never let any stock be too large a proportion of my portfolio. I am not concerned about the increase in the number of shares, because this company has been making acquisitions.
TransCanada is a leader in energy infrastructure. Their network of pipeline taps into virtually all major gas supply basins in North America. TransCanada is one of the continent’s largest providers of gas storage and related services. It is a growing independent power producer. Its web site is www.transacanada.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 for stocks followed and investment notes. Follow me on twitter.
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