Thursday, April 2, 2015

TransCanada Corp.

It is the Easter long weekend. I will not be blogging on Good Friday or Easter Monday. I am taking Easter Monday off as it was always a problem day for me when I worked. Schools were closed and also the Day Cares associated with schools were closed but I still had to go to work. It was always a problem to find someone to babysit my son. Now I can take Easter Monday off and I intend to.

Sound bite for Twitter and StockTwits is: Dividend Growth Utility stock. What you should expect from a utility stock for total return is around 8% per year. This stock meets this standard. I have done better because I took a chance on it when it cut dividends and the stock price sank. 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.

It is interesting to review this stock back to back with TransAlta at this point. TransAlta has just cut their dividends to reorganize the company. I had bought TransCanada in 2000 when they were cutting their dividend to reorganize the company. I only paid $12.01 per share for this company in 2000.

Since then I have made several other purchases. I have paid an average of $30.71 per share on a company that is currently selling at $54.15. I have done well and have a total return of 12.20% with 7.37% from capital gains and 4.83% from dividends.

Total return on this stock over the past 5 and 10 years is at 11.53% and 7.67% per year. The dividend portion of this return is 4.18% and 3.69% per year over the past 5 and 10 years. The capital gains portion of this return is 7.35% and 3.98% per year over the past 5 and 10 years. I have done better probably because my first purchase was in 2000 at a low price. I have held this stock for 15 years now.

This is a dividend growth company. The dividends increases are moderate as is the dividend yield. The current dividend yield is 3.84% and the 5 year median dividend yield is 3.94%. The dividends have grown at 4.8% and 5.1% per year over the past 5 and 10 years. The last dividend increase was in 2015 and the increase was for 8.3%. This is a higher dividend increase than they have had for the past 10 years.

Outstanding shares have increase by 0.70% and 3.87% per year over the past 5 and 10 years. So, when looking at growth we need to pay attention to the per share values. Revenue and Earnings growth is low to moderate. Cash Flow growth is moderate to good.

Revenue is up by 2.6% and 7.2% per year over the past 5 and 10 years. Revenue per Share is up by 1.9% and 3.2% per year over the past 10 years. EPS is up by 3.1% and 1.5% per year over the past 5 and 10 years. Cash Flow is up by 6.7% and 9.9% per year over the past 5 and 10 years. Cash Flow per Share is up by 4.2% and 5.76% per year over the past 5 and 10 years.

Return on Equity has not been above 10% over the past 5 years. From 2000 to 2008 ROE was above 10%. The ROE for 2014 is 8.4% with a 5 year median value of 8.1%. The ROE on comprehensive income for 2014 was lower at 7.6% and its 5 year median is at 7.7%. This suggests that the earnings may not all be of good quality.

For 2014 the Liquidity Ratio is very low but it has always been quite low. This ratio is 0.47 for 2014. If you add in cash flow after dividends it only reaches 0.83. However, if you add back in the current portion of the long term debt the value is 0.61 and adding in cash flow after dividends we get to 1.08. Still a low figure, but this is a utility stock. Note that when this ratio is below 1, it means that current assets cannot cover current liabilities.

The Debt Ratio is at1.54, an acceptable value. The Leverage and Debt/Equity Ratios for 2014 are 2.85 and 1.85. These are rather normal for utility stocks.

This is the first of two parts. The second part will be posted on Tuesday, April 7, 2015 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.


  1. Hi,
    thanks for this follow-up.

    I was fortunate to buy
    at ACB-price of 17.75 $

    My best dividend income
    as a revenue replacement

    I also follow TRP on

    Have a good spring

    Yvan F

  2. Buying good stocks at reasonable prices is what we should always aim for.