Thursday, February 28, 2013

TransCanada Corp

I own this stock of TransCanada Corp (TSX-TRP, NYSE-TRP). I first bought this stock in 2000 when it decreased it dividends and was reorganizing. It is a good company and I thought at the time it was doing the right thing. The company had started to reduce the dividend in 1998 and it hit the low point in 2000. It took 7 years (2005) before the dividend paid exceeded the dividends prior of 1998.

I bought some more of this stock in 2006. I have made a return of 12.35% per year on this company's shares. Of my total return, 4.96% per year is attributable to dividends and 7.39% per year is attributable to capital gains. Over the past 5 and 10 years, shareholders' total return would be 6.68% and 11.86% per year, respectively. Of the above total returns, 3.67% and 4.41% per year would be attributable to dividends and 3.01% and 7.45% per year attributable to capital gain.

This stock pays a reasonable dividend and gives reasonable increases in dividends. The current dividend yield is 3.86% and the 5 year median dividend yield is 4.11%. The dividend growth over the past 5 and 10 years is at 5% and 5.7%. The most recent increase, which was for 2012, was 4.8%.

The Dividend Payout Ratios are also good with 5 year median DPRs for earnings at 76.5% and for cash flow at 33%. The DRPs for earnings was higher than usual in 2012 at 94.6%. Until the last few years, the DPR for earnings was under 60%. The DPR for cash flow has fluctuated for has not changed that much.

The outstanding shares have been increasing at the rate of 5.5% and 4% per year over the past 5 and 10 years. The increases in shares have been due to stock options and DRIP. Revenue has declined over the past years at 2% per year and up by 4.4% per year over the past 10 years. The Revenue per Share has declined by 7% per year over the past 5 years and has not increased over the past 10 years.

However, if you look at 5 year running values, the Revenue per Share has only declined by 1% per year over the past 5 years and has increased by 2% per year over the past 10 years. Sometimes you need to look at 5 year running values rather than specific points in time. For the 5 year change in Revenue per Share I was looking years of 2007 and 2012. For the 5 year running values I was looking at the average Revenue per Share from the period of 2003 to 2007 compared to the period from 2008 to 2012.

Earnings is down over the past 5 years by 4.4% per year and up over the past 10 years at 1.7% per year. The Cash Flow per Share is down over the past 5 years by 1% per year and up by 1.7% per year. In both these cases the 5 year running averages is better. Book Value per share is up by 4% per year and 6.4% per year over the past 5 and 10 years. None of the growth values are great, but the economy has not be that great lately either.

The Return on Equity is at 8.7% and the 5 year median is 8.7%. The ROE on comprehensive income is 8.6% and the 5 year median ROE is 8.6%. (The ROE on comprehensive income can basically confirm that the ROE on net income is of good quality.)

This is a utility stock and as most utility stocks, it has a heavy debt load. The Liquidity Ratio is low at 0.57. If you consider also the cash flow after dividends, this ratios becomes 1.04. This is ok, but nothing to write home about. The Debt Ratio is much better at 1.62. The Leverage and Debt/Equity Ratios are rather typical for a utility at 2.86 and 1.77.

If you are starting to build a portfolio, utility stocks are a good place to start. They tend to be at the low end of risk and quite conservative. They provide a decent dividend and decent dividend growth. Such stocks tend to be less volatile than the TSX. That means that it will not lose as much in bear markets, but it also means that it will not gain as much in bull markets.

This is a good conservative utility stock and could be a core holding in a conservative portfolio.

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 or StockTwits.


  1. Where do you get your raw data for constructing your spreadsheets?

    Thank you for your work, I appreciate all the great analysis.

  2. The vast majority of my data come from a company's annual report. However, I do look at Reuters and at insider trading reports, and some analysts reports when I can.