TransCanada Corp

Sound bite for Twitter and StockTwits is: Dividend growth utility. Testing the stock price says that it is reasonable and above the median to expensive. See my spreadsheet on TransCanada Corp.

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 can get really upset at company when a trusted company cuts dividends.

They cut the dividend in 1999 and it was able to surpass the old dividend high by 2005. If you hold companies for the longer term like I do, this can happen to one of your stocks. To sell you stock at such a time may not be your best options. However, every situation must be properly analyzed to determine the appropriate course of action.

For the stock I bought 2000, some 16 years ago, I am earning a dividend yield of 20.32% on my original purchase price. That is because I bought my initial stock very cheap. For the two stock purchases I made in 2006 some 10 years ago, I am making a dividend yield of 7.36% and 7.40% on my original purchase price. It pays to buy good companies when they take a big hit.

The stock has good dividends. The current dividend yield is 4.17% based on dividends of $2.50 and a stock price of $59.98. The 5 year median dividend yield is 3.54%, the 10 year median dividend yield is 4.06% and the historical median dividend yield is 4.28%.

I must admit that I have some concerns about the low EPS and high Dividend Payout Ratios of late. The dividend paid in 2016 was $2.26 and EPS was just $0.16. For 2016 there was good will and other asset impairment charges and loss on the sale of assets. This occurred also in 2015. Analysts do not expect the same in 2017. For 2016 the company says that what they really earned was $2.78 per share and that the DPR for this was 81%.

No analyst seems to expect a dividend cut. In fact they think that dividends will go up again in 2018 and 2019. The dividend growth has been low with the dividend growth over the past 5 and 10 years at 6.37% and 5.85% per year. However, the last dividend increase was higher than it has been for quite some time at 10.6%. This would suggest that the company also expects growth in earnings in the near future.

The debt ratios are fine, but nothing to write home about. The best one is the Long Term Debt /Market Cap Ratio which is 2016 was 0.76. You get concerned with it is closing on 1.00. So this is fine at present. The Liquidity Ratio is 1.05. This means that the current assets can (just) over the current liabilities. If you added in cash flow after dividends, it is a better 1.46. The Debt Ratio is 1.42. I prefer these last two to be at 1.50 or above. The Leverage and Debt/Equity Ratios are 3.39 and 2.39. These are a little high.

The 5 year low, median and high median Price/Earnings per Share Ratios are 19.25, 22.10 and 24.95. The 10 year ratios are 17.46, 19.10 and 20.74. The historical ones are 12.30, 14.04 and 16.02. It would seem that the price gain has included a rise in P/E Ratio. The current P/E Ratio is 19.99 based on a stock price of $59.98 and 2017 EPS estimate of $3.00. This stock price testing suggests that the current stock price is relatively expensive historically but more relatively reasonable in current market.

I get a Graham Price of $39.81. The 10 year low, median and high median Price/Graham Price Ratios are 1.19, 1.29 and 1.39. The current P/GP Ratio is 1.51 based on a stock price of $59.98. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year Price/Book Value of 2.00. The current P/B Ratio is 2.56 based on BVPS of $23.48 and a stock price of $59.98. The current ratio is some 28% higher than the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.

The current dividend yield is 4.17%. The historical median dividend yield is 4.28%. The current yield is some 2.6% below the historical median. This stock price testing suggests that the stock price is relatively reasonable but above the median.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The vast majority is Buy recommendations and the consensus recommendation is a Buy. The 12 month stock price consensus is $68.44. This implies a total return of $18.27% with 14.10% from capital gains and 4.17% from dividends based on a current price of $59.98.

Matthew DiLallo of Motley Fool is impressed by the company's yearly dividend growth over the past 17 years. A news article by the Canadian Press on the Calgary Herald talks about the company selling more pipelines to TC Pipe Lines an affiliated limited partnership. It would seem that this company is reorganizing again. See what analysts are saying about this company on Stock Chase.

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 Corp.

The last stock I wrote about was about was TransAlta Corp. (TSX-TA, NSYE-TAC)... learn more . The next stock I will write about will be AltaGas Ltd (TSX-ALA, OTC-ATGFF)... learn more on Wednesday, March 22, 2017 around 5 pm. Tomorrow on my other blog I will write about Turning to Religion... learn more on March 21, 2017 around 5 pm.

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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.