It’s time for another dividend stock analysis as I search for the next good company I can trust to grow my money for decades to come. TransCanda Corp (TSE: TRP) is under the spotlight today.
According to the Dividend All-Stars list, TransCanada Corp has increased their dividends without fail for the past 14 years. If I put that into a bit of perspective, TRP has been paying share holders more and more in dividends every year since I was 7 years old. I’d say that’s a good indication as any that the dividend will continue to grow in the future.
Now let’s dive right in: “TransCanada Corporation (TransCanada) is an energy infrastructure company. The Company operates through three segments: Natural Gas Pipelines, Liquids Pipelines and Energy. Natural Gas Pipelines and Liquids Pipelines consist of natural gas and liquids pipelines in Canada, the United States and Mexico, as well as its regulated natural gas storage operations in the United States.”
So just like Canadian Utilities Limited (TSE: CU), TRP is focused in energy and pipelines. However, CU has a broader range of diversification in its operations which means, in theory, it may perform better as crude oil prices still face uncertainty.
TRP is currently trading at $53.61, down 16.05% from it’s 52-week high of $63.86 and up 8.74% from it’s 52-week low of $49.30. As an investor, I like to see that it is trading closer to it’s 52-week low rather than it’s 52-week high. This represents a better price at which to initiate a position in TRP. It is currently trading at a P/E (TTM) of 22.1, which is above the P/E of 20 which is the most 8I would be wiling to pay.
Thomson Reuters has a 12-month mean price target of $62.00 on the stock, which would represent a 15.90% stock price appreciation. They also have a 12-month high price target of $68.00, and a low of $54.00. Currently they’ve attributed a Hold rating on TRP, which is right on the edge of a Buy signal.
TRP pays an annual dividend of $2.08 per share. This represents a very attractive yield of 3.88% in relation to its $53.61 share price. Currently, TRP has a payout ratio of 80.91% which is pretty high and on the edge of what I’d be willing to accept. However, with it’s 14 year yield growth track record I could not imagine them cutting the dividend – and I’d hope they don’t freeze it.
TRP had a concensus estimate of $0.66 EPS for Q1, which was met in their announcement on May 1st, 2015. Two days after this announcement, however, the stock price fell nearly $-0.91 to $55.34, and has since fallen further. I’d watch the price fall quite a bit more, at least to drop the P/E to below 20 before initiating a position. Investors have been a little erratic ever since the NDP majority vote in Alberta, and all the new regulations they are planning to implement which would make these companies less profitable. The price may fall further in accordance with this as well.
TRP has an annualized 10-year dividend growth rate of 5.17%, and a 4.78% 5-year annualized dividend growth rate. Now, assuming TRP continued at a 5% annualized dividend growth rate from 2015 to 2025, the yield on cost would be 6.35%. This means that by investing now at TRP’s 3.88% dividend yield, if they continued raising their dividend at a 5% average for the next 10 years, you’d be receiving an attractive 6.35% dividend yield based on the cost you paid today.
Looking at TRP’s 1-year chart, it appears to be a volatile stock making large strides up and down. The best time to invest would be when it’s in one of the trenches of its chart. However, by looking at the 5, 10, and All-Time chart, the stock prices has floated up and up.
TRP is definitely a long-term dividend-growth oriented investment, which would be nice to pick up on a downward trend which could happen with the price of crude oil and the NDP majority vote in Alberta. Though, as with the stock market as a whole, is completely unknowable.
And that’s that for another dividend all-star, we’ll pick up again real soon with another 10-year+ dividend grower!