Barron's: TransCanada is attractive alternative to U.S. MLPs, could rise 35%


TransCanada (TRP +1.7%) opens higher after a favorable weekend report from Barron's, which says that even without the $5.4B Keystone XL pipeline, the company boasts an industry-leading $30B backlog of projects in the works.

TRP shares aren't cheap based on reported earnings, trading at ~23x estimated 2014 after-tax profit, but TRP has a strong growth outlook - management sees EBITDA nearly doubling by the end of the decade - and the shares fetch just 12x estimated 2015 EBITDA.

Investors have given TRP little credit for its conservative dividend policy, which pays out a third of its cash flow in dividends while retaining funds to reinvest in its capital program.; there's speculation that TRP, whose current investor base is dominated by Canadian institutional holders, could attract a U.S. activist investor who would push for a more generous dividend and a separation of the pipeline and power-generating assets.

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Comments (3)
  • Ruffdog
    , contributor
    Comments (3699) | Send Message
     
    Barron's was the one that said that KMP was expensive at 80. Must have a bunch of clients long TRP.
    25 Aug 2014, 09:50 AM Reply Like
  • Archman Investor
    , contributor
    Comments (3379) | Send Message
     
    Actually you are better off owning $PBA or $IPPLF which have more growth and upside. However Barron's, like 99.9% of Wall St., offers zero in the way of innovative research. They just re-hash the same stocks over and over.
    25 Aug 2014, 09:55 AM Reply Like
  • bobby44
    , contributor
    Comments (502) | Send Message
     
    I agree about the lack of research. TRP is a solid dividend payer that suits the institutional investor. Too much publicity over the last few years but that will pass and the company will trundle along.

     

    Do you know what would be an advantage to TRP splitting power from pipe? Both are utility type assets.
    26 Aug 2014, 07:23 PM Reply Like
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