TransCanada Corp. 2

On my other blog I am today writing about possible cheap dividend stocks for April 2015 continue...

Sound bite for Twitter and StockTwits is: Not Cheap. A lot of utilities have been expensive for a while. People have considered utility stocks as a good place to put money while interest rates are very low. See my spreadsheet at trp.htm.

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 price 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.

The first thing I noticed was that there are an awful lot of stock options granted to insiders. However, the actual number of stock options that increase outstanding shares is fine. In 2014 outstanding shares were increased by 1.221 shares or 0.17%. These shares have a book value of $53M and this number of shares was worth $69.7M at the end of 2014. Outstanding shares were increase by 0.32%, 0.23% and 0.28% between 2011 and 2013.

When I look at insider trading, I find $1.8M of insider buying and $22.6M of insider selling with net insider selling at $20.8M or 0.05% of the market cap.

The 5 year low, median and high median Price/Earnings per Share Ratios are 19.21, 20.65 and 22.09. The 10 year corresponding values are a bit lower at 16.07, 17.67 and 19.54. The current P/E Ratio is 22.66 based on a stock price of $54.15 and 2015 EPS estimate of $2.39. This stock price testing suggests that the stock price is relatively expensive.

I get a Graham Price of $35.72. The 10 year low, median and high median Price/Graham Price Ratios are 1.11, 1.23 and 1.34. The current P/GP Ratio is 1.52 based on a stock price of $54.15. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year Price/Book Value per Share Ratio of 2.00. The current P/B Ratio is 2.28 based on a stock price of $54.15 and BVPS of 23.73. The current P/B Ratio is some 14.3% higher than the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable, but a bit on the high side. For this test to show price is expensive, the current P/B Ratio would have to be 20% higher than the 10 year median ratio.

The 5 year median dividend yield is 3.94% and the current dividend yield at 3.84% is some 2.6% higher. I get historical average and median dividend yields of 4.63% and 4.31%. The current dividend yield is some 17% and 11% higher. Also the current dividend yield is within 11% of the historical low dividend yield of 3.48%. This stock price testing suggests that the stock price is relatively reasonable, but a bit on the high side.

The analysts' recommendations are Strong Buy, Buy, Hold and Underperform. The consensus recommendations would be a Hold. The most recommendations are a Buy and a Hold, but there is one more Hold recommendation than the Buy recommendation. The 12 month consensus stock price is $61.04. This implies a total return of 17.23% with 13.39% from capital gains and 3.84% from dividends.

This article in the Montreal Gazette is talking about this company scraping plans for a Quebec oil port. This article in the Financial Post talks about TransCanada being investigated for natural gas safety regulations. This article in the Financial Post talks about TransCanada getting into the rail business as Keystone XL delay drags on. In this article by Jacob Donnelly in the Motley Fool, Jacob gives 3 reasons to buy this company.

This is the second of two parts. The first part was posted on Thursday, April 2, 2015 and is 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.

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