Thursday, February 24, 2011

TransCanada Corporation (TRP) Dividend Analysis

This week I will be reviewing TransCanada Corporation (TRP on both TSE and NYSE). Another large energy distributor operating in Canada and the US. TRP operates in 2 major segments:

  • Pipelines
  • Energy
TransCanada pipelines cover more than 60,000 kilometres (37,000 miles). From Alberta (soon to be Alaska) to Louisiana, and from Oregon to New Hampshire through Canada. It also owns (or partially owns) 20 power plants for their energy segment.

Quick Fact

  • Stock Ticker: TRP on both NYSE & TSX
  • Market Cap.: 26.90B$
  • P/E: 21.69
  • EPS: $1.77
  • 5 Year EPS Growth Average: -5.98%
  • Dividend Yield: 4.37%
  • 5 Year Dividend Growth Average: 5.57%
  • ROE: 7.93%
  • 52-Week Low: $30.01
  • 52-Week High: $39.28
  • 52-Week Range: 91.37%

Dividend Growth

On February 15, 2011, TRP increased their dividends by 5%. The 5% increase is in line with their 5 year average and does more than keep up with inflation. In fact, it has consistently increased its dividends by 8 cents over the past 8 years making it a Canadian Dividend Aristocrat.

TransCanada (TRP) Dividend Growth

Its dividend growth graph is quite amazing for the past 10 years.  I would prefer 8% or so on the dividend growth but considering the growth over the past 8 years, the combination of the dividends and stock appreciation is still quite nice.

TransCanada (TRP) Stock Growth


Dividend Payout Ratio

2010 was not a great year for their payout ratio but otherwise TRP is relatively consistent and within the ratio of its main competiror Enbridge.

TransCanada (TRP) Payout Ratio

EPS Growth

Similar to the payout ratio, TRP had a step back in 2010. In doesn't have stellar record growth with its earnings per share but it's not erratic either. It shows an upward tendency which is something we can appreciate.

TransCanada (TRP) EPS Growth

Thoughts

I am currently an owner of TRP and I am in for the long haul. I own it through Computershare and I am slowly dripping it. I don't think any investor should expect record stock appreciation but due to its business, we should expect good dividend income and growth for many years. At least until all our homes are solar powered.

Readers: What do you think a TRP?

Full Disclosure: At the time of writing I am long ENB.

Disclaimer: The material presented should not be considered a recommendation. You should always do your own research and reach your own conclusion.

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