Friday, March 1, 2013

TransCanada Corp 2

I own this stock of TransCanada Corp (TSX-TRP, NYSE-TRP). I first bought this stock in 2000 and then 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.

When I look at insider trading, I find $33.3M of insider selling and net insider selling at $31.9M. So there is some $1.6M of insider buying. Most of the insider selling is by officers at $28.3M. There is no insider selling by directors and directors are doing $0.5M of the insider buying. All of insider selling seems to be of options.

The CEO has shares worth $4.5Mand has options are worth $77.5M. The CFO has shares worth $0.5M and has options worth $14.4M. An officer has shares $0.4M and has options worth $6.8M. A director has shares worth $0.6M and has options worth $1.9M. This is just to give you an idea on insider share ownership and option values.

When I look at analysts' recommendations I find Buy and Hold recommendations. The consensus recommendation would be a Buy (but just barely). The 12 month stock price is $51.20. This implies a 12 months total return of 10.59% with 3.68% from dividends and 6.91% from capital gains.

The 5 year low, median and high Price/Earnings Ratios are 16.74, 18.61 and 20.48. The current P/E based on a stock price of $47.89 and a 2013 EPS of $2.29 is 20.91. I get a Graham Price of $33.85. I get 10 year low median and high median P/GP Ratios of 1.03, 1.16 and 1.29. The current P/GP Ratio is 1.41.

The current dividend yield is 3.68% and the 5 year median dividend yield is 4.11%. The current yield is 11% below the 5 year median yield. I get a 10 year median Price/Book Value per Share Ratio of 1.16. The current P/B Ratio based on a stock price of $47.89 is 1.15.

What my stock price testing shows is that the stock price is anywhere from reasonable to a bit pricey. Utility stock have been bid up lately as there people investing in utility stocks just for the return. This is because return on bonds is low to non-existent. Utilities are considered to be a rather safe investment. We are in a bit of a cyclical bull market, so I do not see the stock price of utilities moving down significantly at the moment.

If you want to buy a low risk stock with a good dividend, this might be a buy for you. It is a bit pricey, so I do not see much in the way of capital gains. The main value of utility is that they do not tend to be as volatile as the TSX. They will not go as high as the TSX, but they will not go as low either. This does not mean that stock price cannot dive on a cyclical bear market, because it can. It just will not dive in price as much as the TSX as a whole.

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.

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