For a company that was featured prominently in the early part of the presidential campaign due to the delay of the Keystone pipeline, Transcanada Corporation (TRP) has been mostly out of the news recently. However, regardless of who wins the presidential election next week, the company is likely to be a long term winning investment for income investors.
Positives/Catalysts for Transcanada:
- If Romney wins the election one of his first acts will be to restart the Keystone pipeline. If Obama wins it will probably be by a razor thin margin. I will look for him to throw his environmental allies under the bus and grant approval of Keystone pipeline as an olive branch to the congress which will still be controlled by the Republicans. It will also reward his union allies with thousands of jobs.
- BMO Capital Markets reiterated its "outperform" rating today on the stock and raised its price to $52 a share from $50.
- The company reported earnings and revenues that were in-line with expectations on its earnings report Thursday. Market reaction was positive given the amount of firms in the sector missing on the revenue side this quarter.
- It also just announced it will build a $3B pipeline to Alberta's oil sands.
Transcanada Corporation operates as an energy infrastructure company in North America. The company operates in three segments: Natural Gas Pipelines, Oil Pipelines, and Energy.
4 additional reasons is a good value and income play at $45 a share:
- TRP yields 4% and has raised its dividend payouts at better than a 5% pace over the past five years. It has also grown revenues at a better than 10% CAGR over the last decade.
- The future is bright for this company as it intends to complete $13 billion of projects that are currently in advanced stages of development over the next three years which should increase sales and operating cash flow significantly.
- Transcanada is well positioned to continue to take advantage of the increasing oil & gas production coming from North America. Its fee based model provides a very stable revenue stream.
- The company has an A- rated balance sheet and is priced at approximately 8 times operating cash flow.