I own this stock of TransCanada Corp (TSX-TRP, NYSE-TRP). When I bought this stock, it was on Mike Higgs' Canadian Dividend Growth Stock list and the other dividend lists that I followed. It had also just cut its dividends so I got it at a very good price.
When I was updating my spreadsheet, I noticed that it has vulnerability in regards to Debt Ratios. The Liquidity Ratio is just 0.40. Current Assets cannot cover Current Liabilities unless this ratio is 1.00. Even adding in cash flow after dividends and adding back current portion of long term debt, this ratio is just 0.97. A good ratio is 1.50. Debt Ratio is a bit too low and Leverage and Debt/Equity Ratios are a bit too high.
The dividend yields are moderate (2 to 4% ranges). The current dividend is 4.94%. The 5, 10 and historical median dividend yields are 4.09%, 4.10% and 4.28%. The dividend increases are low (below 8%) to moderate (8 to 14%). The current increases are better than the longer term ones. There was a dividend decrease in 1999.
The Dividend Payout Ratios are for EPS for 2018 is 69% with 5 year coverage at 138%. They had an earnings loss in 2015 and very low earnings in 2016. The DPR for CFPS for 2018 is good at 37% with 5 year coverage at 36%. I like the DPR for CFPS to be at 40% or less. So this DPR is good.
Debt Ratios are a vulnerability for this company. The only ratio I like is the Long Term Debt/Market Cap Ratio which is currently at 0.66 and is the only one I like. I discussed the Liquidity Ratio above. The Debt Ratio is currently at 1.46. I prefer this to be at least at 1.50. Leverage and Debt/Equity Ratios for 2018 are 3.19 and 2.19. I would prefer them to be below 3.00 and below 2.00, respectively.
The Total Return per year is shown below for years of 5 to 28 to the end of 2018. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.
The 5 year total return is low because of the drop in this stock (and the market) at the end of last year. So far this year, the stock is up 24%. However, the 5 year total return to date is not much better at 5.42%. The stock price was relatively high 5 years ago.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 8.17% | 4.71% | 0.09% | 4.63% |
| 2008 | 10 | 6.47% | 8.79% | 3.93% | 4.86% |
| 2003 | 15 | 6.29% | 8.40% | 3.80% | 4.61% |
| 1998 | 20 | 4.22% | 8.30% | 3.87% | 4.43% |
| 1993 | 25 | 4.67% | 8.10% | 3.60% | 4.50% |
| 1990 | 28 | 4.99% | 8.46% | 3.83% | 4.62% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 17.41, 18.12 and 18.83. The 10 year corresponding ratios are 17.80, 19.10 and 20.74. The historical corresponding ratios are 12.32, 14.04 and 16.02. The current P/E Ratio is 15.88 based on a stock price of $60.67 and 2019 EPS estimate of $3.82. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $48.72. The 10 year low, median, and high median Price/Graham Price Ratios are 1.23, 1.38 and 1.46. The current P/GP Ratio is 1.25 based on a stock price of $60.67. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share Ratio of 2.00. The current P/B Ratio is 2.20 based on a stock price of $60.67, Book Value of $25,558M and Book Value per Share of $ 27.62. The current ratio is 10% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 4.28%. The current dividend yield is 4.94% based on dividends of $3.00 and a stock price of $60.67. The current dividend yield is 15.5% above the historical median yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 3.63. The current P/S Ratio is 3.76% based on 2019 Revenue estimate of $14,799M, Revenue per Share of $16.12 and a stock price of $60.67. The current ratio is 6.8% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is relatively reasonable. The best test is the dividend test. I like it because it is using current data and not estimates. You cannot ignore the P/S Ratio, as I have said before, but here the ratio is not far from the median.
When I look at analysts’ recommendations, I find Strong Buy (4), Buy (8), Hold (7) and Underperform (1). The consensus would be a Buy. The recommendations are broad, so there is a broad range of opinions on this stock. The 12 months consensus stock price is $62.32. This implies a total return of 7.66% with 2.72% from capital gain and 4.94% from dividends. Analysts do not expect much upside to this stock and this shows in Hold and Underperform ratings.
See what analysts are saying about this stock on Stock Chase. They like this company but note that it is tough to build pipelines in Canada. Karen Thomas on Motley Fool likes this stock. A writer on Simply Wall Street talks about insider selling. The Net Insider Selling is high at 0.06% of market cap, but this is because people are cashing in options rather than taking stock rather than selling stock. The blogger Dividend Earner has a good review of this stock. The site Market Beat shows there is a Buy consensus on this stock.
TransCanada operates as an energy infrastructure company, consisting of pipeline and power generation assets in Canada, the United States, and Mexico. The company also owns or has interests in 20 power-generation facilities. 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 27, 2019 around 5 pm. Tomorrow on my other blog I will write about Dividend Payout Ratios.... learn more on Tuesday, March 26, 2019 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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
No comments:
Post a Comment