Monday, March 31, 2014

TransCanada Corp

On my other blog I am today writing about CPP continue...

I own this stock of TransCanada Corp (TSX-TRP, NYSE-TRP). 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.

This stock has a good dividend with a moderate growth. The 5 year median dividend yield is 4.1% and the current dividend yield is 3.8%. The 5 and 10 year growth in dividends is at 4.8% and 5.36% per year. This stock is considered to be a dividend growth stock.

The 5 year median Dividend Payout Ratios are 76.5% for Earnings per Share and 33% for Cash Flow per Share. For 2013 the DPRs were 75% for EPS and 32% for CFPS. The DPR for 2014 are expected to be similar.

I bought this stock in 2000, 2006 and 2013. My total return is at 11.73% with 6.72% from capital gains and 5.01% from dividends. The total return on this stock over the past 5 and 10 years is at 11.03% and 9.45% per year. The dividend portion of this return was 4.21% and 4.07% per year. The capital gain portion of this total return was at 6.82% and 5.38% per year. What I look for in a utility stock is an 8% per year total return with around 4% from capital gains and around 4% from dividends.

The outstanding shares have grown at the rate of 2.8% and 3.9% per year over the past 5 and 10 years. Shares have grown because of stock options and DRIP. Growth in CFPS is fine, but there is no or little growth in Revenue per Share and EPS.

RPS has declined by 2.3% per year over the past 5 years and grown by 1.2% per year over the 10 years. Revenue is a bit better with growth of 0.4/% and 5.1% per year over the past 5 and 10 years.

The EPS has declined by 0.8% per year over the past 5 years and has grown by 3.2% per year over the past 10 years. Net Income is up by 5.8% and 8.4% per year over the past 5 and 10 years. Comprehensive Income is up by 13.2% and 12.7% per year over the past 5 and 7 years.

CFPS is up by 3.1% and 4.3% per year over the past 5 and 10 years. Cash Flow is up by 5.8% and 8.4% per year over the past 5 and 10 years.

The Return on Equity has not been at or above 10% over the past 5 years. The ROE for 2013 was 9.5%, the highest it has been over the past 5 years. The 5 year median ROE was at 8.1%. The ROE on comprehensive income was higher at 13.4%. The 5 year median ROE was 8.6%.

The Liquidity Ratio is 0.59. This ratio with the cash flow less dividends is 1.03. If you exclude the current portion of long term debt, the ratio is 0.72 and if you add in cash flow less dividends you get 1.26. As with a lot of utilities, this company depends on cash flow to pay current liabilities.

The Debt Ratio is quite good at 1.60. The Leverage and Debt/Equity Ratios are rather typical for a utility at 2.68 and 1.68, respectively.

This company has performed as expected. I am getting a nice dividend with yearly increases. For my purchase in 2000 which occurred some 14 years ago, I am making a yield of 15.8% on my original purchase price. For the stock I bought in 2006, some 8 years ago, I am making around a 5.7% yield on my original purchase price. See my spreadsheet at trp.htm.

This is the first of two parts. The second part will be posted on Tuesday, April 1, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

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.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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