In Focus – TRP

It is easy to determine which stocks are the highest paying dividend stocks. It is more difficult (and more important) to determine which stocks are the best dividend stocks. In this report, we will explain why we feel that TransCanada may be one of the highest paying dividend stocks available, but it is not one of the best dividend stocks.

Background

TransCanada Corporation (TRP) is an energy infrastructure company headquartered in Calgary Canada and operating predominantly in North America. TRP has a network of wholly owned and affiliated pipelines. TransCanada is also one of North America’s largest suppliers of gas storage and related services. The company operates through three segments: Natural Gas Pipelines, Liquids Pipelines, and Energy.

Its Natural Gas Pipelines and Liquids Pipelines consist of its natural gas and liquids pipelines throughout North America. The Energy segment includes its power generation and the non-regulated natural gas storage business in Canada.

Stock Fundamentals

TransCanada (TRP) has shown a steady increase in its dividend over the last seven – eight years. Unfortunately this increase has not been supported by many other aspects of its business. It sales, cash flows, and free cash flows have all been stagnant over this period. They have barely budged.

The dividend is the single best sentinel of future performance, but it still has to be supported by the other fundamentals. And it is questionable if TRP can continue this increase in dividends if the other numbers do not comply with the growth in dividend. And we do not see the other numbers doing an about face soon. The dividend growth is likely to revert to growth in the other numbers than the other way around.

Management does not agree with us. The management of this company says that it wants to increase the dividend by 8 – 10 % per year through 2020. If they are able to do this and improve the rest of the fundamentals, we may change our mind about this company. For now, we feel TRP’s fundamentals are poor. We do not consider TRP one of best stocks to buy now.

Stat Sheet – TransCanada Corporation 4/26/16

Ticker TRP
Industry  Natural Gas Utilities
Price $ 40.38
Market Cap  $ 28,629
Dividend Yield 4.02
Dividend/CFOp 0.396
Equity/Assets 0.257
Average Equity/Assets 0.313
Financial Strength Average
Growth Prospects Below Average
Beta 0.78
Price Volatility Below Average
Stock Fundamentals D

(Our assessment of this firm’s fundamentals will be in effect for the rest of calendar year 2016.)

If you would like to some of the other stocks we would consider some of the best stocks to buy now, click the link below.

Best Stocks to Buy Now

To learn why we have a soft spot for the best dividend stocks, click the link below.

Why the Best Dividend Stocks

Disclaimer – Information contained herein has been obtained from sources believed to be reliable. Neither the author nor the publisher guarantees the accuracy or completeness of the information and methods described. This information is offered as general commentary only. It is not intended as investment advice. Investment and trading of securities involves risk, including of loss of capital. Market conditions change over time, and no assurance can be given that a reader may apply the principles described to make a profit. The author and publisher expressly disclaim all and any liability to any person for any investment or trading decisions that the reader may make in reliance on this information.

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In Focus – TRP

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