Monday, March 28, 2011

TransCanada Corp

I first bought this stock (TSX-TRP) in 2000, after they lowered their dividends because of restructuring. They upset a lot of investors and the stock price plummeted. On these shares, I have made a return of 18.6% per year. About 6.4% of that return is dividend income. I bought more shares of this company in 2006 and my total return to date is 11.5% per year. Approximately 5% of this return would be in dividend income.

My total return on the stock I bought in 2006 would be around 7% per year, with approximately 4% of this return in dividend income. As you can see from this, the total return has not been great over the past few years. In fact, Revenue, Earnings and Cash Flow having been declining over the past couple of years (2009 and 2010). However, analysts expect all these items to be much better for the financial year ending in 2011.

Because of the recent declines in revenue, the 5 and 10 year growth figures are poor with revenue per share growth being negative for the last 5 years and at just 3% per year for the last 10 years. The earnings per share have likewise been poor with negative growth for the last 5 years and at just 2% per year for the last 10 year.

The cash flow per share has been better. The 5 year growth is at 5.2% per year. The only reason that the 10 year growth rate is negative is because the cash flow 10 years ago was higher than usual. Without this higher than usual cash flow 10 years ago, the growth would be in the 6% range. The growth in book value is fine with the 5 and 10 year growth at 8% per year.

When looking at debt ratios, I find that the Liquidity Ratio is low, but it has a tendency to be low on this type of company. The Liquidity Ratio for 2010 is 0.57. The Asset/Liability Ratio is much better at 1.62. The Leverage Ratio at 2.79 and the Debt/Equity Ratio of 1.72 are both fine. The Return on Equity for 2010 is ok at 7.3% and the 5 year average is better at 10.5%.

I am happy with my investment in this company. They are on the dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices).

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.

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