TC Pipelines Looks Very Attractive

| About: TC PipeLines, (TCP)

TC Pipelines LP and its subsidiaries acquire, own and manage energy transmission pipeline systems in the US and Canada. The partnership has experienced flat earnings over the past five years though that is expected to change substantially this year. In that same period, dividends have increased 5% annually and return on equity has averaged 10-15%. The company should continue to expand moderately as a result of:

(1) It is a key player in the Western Canada gas transmission market for which there is robust demand,

(2) acquisitions, and

(3) its low debt to equity ratio provides financial flexibility for future acquisitions.


(1) Difficulty in finding attractive acquisition candidates,

(2) its cash distributions are subject to future operating performance, and

(3) subject to possible changes in energy regulations.

TCP is rated A by Value Line, carries a 25% debt to equity ratio and the stock yields 6.7%.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2003
TCP 6.5% 3% 99% 7
IND* 6.7 6 114 NA

Debt/Equity ROE EPS Down Since 2001 Net Margin Value Line Rating
TCP 25% 13% 3 75% A
IND* 109 17 NA 7 NA

* IND is the average of the Oilfield Services/Equipment Industry as compiled from Value Line


Note: TCP stock made good progress off its November 2008 low, quickly surpassing the down trend off its April 2007 high (red line) and the November 2008 trading high (green line). The stock is in a long term up trend (straight blue lines). The wiggly blue line is on balance volume. The High Yield Portfolio owns a full position in TCP, having recently purchased it. The stock is on the High Yield Buy List. The upper boundary of its Buy Value Range is $46. The lower boundary of its Sell Half Range is $67.

(Click to enlarge)

Disclosure: I am long TCP.