TransCanada Corp

I first bought this stock (TSX-TRP, NYSE-TRP) in 2000 and then bought more in 2006. I had been looking at the stock for a while and in 2000, when for the second year in a row they reduced their dividends, I bought. Dividends were reduced as the company wanted to reorganize for the future benefit of the shareholders. This stock was slammed really hard for their trouble. I have made a total return on this stock of 10.7% per year.

This is a utility stock, and when looking at some growth figures, some are good and some just ok. This is not a growth stock, so do not expect great growth. What you can expect is solid earnings and good dividends. As I said yesterday, from utility stocks, you should expect 8% total return with approximately 4% from dividends and 4% from growth in stock value. Over the past 5 or 10 years, total return using average prices, would be 7.8% and 11.9% per year, respectively. The 5 year total returns are a little low, but we are in a recession.

If you look at growth in earnings, the 5 and 10 year figures are 0% and 4.3% per year, respectively. Earnings were low in 2009 and they are not expected to pick up again until 2011. Since the earnings for the 1st quarter came in lower than expected, the earnings estimates for 2010 have been lowered. The earning estimates for 2011 have basically remained the same. (By the way, this is a typical reaction to a lower than expected quarterly earnings result.)

If you look at growth in dividends, the 5 and 10 years figures are 5.3% and 3% per year, respectively. They have raised their dividends this year and they certainly have enough cash flow to cover the dividends to be paid. The last growth figures I want to talk about is that for book value. The 5 and 10 year growth in book value is 11% and 8% per year, respectively. These are good long term results.

The Return on Equity figures are good. The 5 year running average is still above 10% and the ROE for 2009 was good at 8.7%. However, the ROE for the 1st quarter is a little lower at 7.4%. The Liquidity Ratio is usually low and the current one is just 0.50. However, the company has enough cash flow and has no trouble securing debt. The Asset/Liability Ratio is healthy at 1.63.

I feel that this stock is a good solid utility stock and I will continue to hold on to the shares I own in this company. I will not be buying more because I already have enough shares for my portfolio in this stock.

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 here TransCanada. See my spreadsheet at 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.