transcanada

TRANSCANADA CORP. $52 (Toronto symbol TRP; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 702.4 million; Market cap: $36.5 billion; Price-to-sales ratio: 3.2; Dividend yield: 4.3%; TSINetwork Rating: Above Average; www.transcanada.com) has received the final permits necessary for its $4.8 billion Coastal GasLink pipeline. It would pump natural gas from northeastern B.C. to a proposed liquefied natural gas (LNG) terminal in Kitimat, B.C. From there, tankers would ship the LNG to Asia. The companies behind the LNG plant will make a final decision by the end of 2016. If they proceed, TransCanada will begin building the pipeline and related facilities in early 2017. TransCanada is a buy....

Exchange-traded funds (ETFs) give you a low-cost, flexible alternative to mutual funds. Here are five ETFs we recommend and one to sell.

ISHARES CANADIAN SELECT DIVIDEND INDEX ETF $21.88 (Toronto symbol XDV; buy or sell through brokers; ca.ishares.com) holds 30 of the highestyield Canadian stocks. Its selections are based on dividend growth, yield and payout ratio. The weight of any one stock is limited to 10% of the ETF’s assets. The fund’s MER is 0.55%, and it yields 4.3%. iShares Canadian Select Dividend’s MER is higher than, say, the iShares S&P/TSX 60 Index ETF because it’s more actively managed. Most market indexes are set up so that the stocks in the index are those with the highest market capitalization and also the most widely traded. However, the iShares Canadian Select Dividend Index ETF aims to zero in on the 30 stocks that it sees as having the highest dividend yields—and yet also the best propects for dividend growth and sustainability. The fund’s top holdings are CIBC, 8.4%; Agrium, 7.4%; Bank of Montreal, 6.0%; Royal Bank, 5.8%; Bank of Nova Scotia, 5.0%; BCE, 4.5%; IGM Financial, 4.1%; Laurentian Bank of Canada, 4.1%; National Bank, 4.0%; TransCanada Corp., 4.0%; TD Bank, 3.5%; and Emera, 3.1%....

These six ETFs hold mostly blue chip, widely traded stocks on Canadian and U.S. exchanges. All of them mirror, or track, the performance of major stock market indexes. That’s opposed to narrower indexes focused on, say, resources or themes such as solar power or biotech. Of course, you pay brokerage commissions to buy and sell these ETFs. But their low management fees give them a cost advantage over most mutual funds. Below we update our advice on all six—five buys and one we don’t recommend....

TRANSCANADA CORP. $50 (Toronto symbol TRP; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 702.3 million; Market cap: $35.1 billion; Priceto- sales ratio: 3.1; Dividend yield: 4.5%; TSINetwork Rating: Above Average; www.transcanada.com) operates a 67,300- kilometre pipeline network that pumps natural gas from Alberta to Eastern Canada and the U.S. This system supplies 20% of North America’s natural gas needs. In 2015, gas pipelines provided 47% of TransCanada’s revenue and 54% of its earnings. The company also owns or invests in 20 power plants in Alberta, Ontario, Quebec and the northeastern U.S. In all, these facilities have over 13,100 megawatts of generating capacity. This business supplied 36% of its 2015 revenue and 24% of earnings. The remaining 17% of TransCanada’s revenue and 22% of earnings came from its oil-pipeline business. The operations mainly consist of the Keystone pipeline, which pumps crude from Alberta to storage terminals in Oklahoma. The oil then travels on to refineries in Illinois. Keystone accounts for 20% of Western Canada’s crude exports to the U.S....

TransCanada recently had to write off its investment in its Keystone XL oil pipeline project after the U.S. government rejected the plan. Political pressure in Canada could also force it to cancel its huge Energy East pipeline. Despite these setbacks, TransCanada’s future looks bright. The company recently announced a big acquisition in the U.S. that should fuel its growth for years to come. As well, it will soon complete $13 billion of smaller pipelines and power plants. The projects already have long-term commitments from future customers. Those contracts cut the risk of these new ventures. TRANSCANADA CORP. $50 (Toronto symbol TRP; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 702.3 million; Market cap: $35.1 billion; Priceto- sales ratio: 3.1; Dividend yield: 4.5%; TSINetwork Rating: Above Average; www.transcanada.com) operates a 67,300- kilometre pipeline network that pumps natural gas from Alberta to Eastern Canada and the U.S. This system supplies 20% of North America’s natural gas needs. In 2015, gas pipelines provided 47% of TransCanada’s revenue and 54% of its earnings....

In addition to TransCanada (see page 41), we like the outlook of these four utilities. Like TransCanada, Emera and Fortis are expanding in the U.S. These purchases cut their reliance on Canada, and should enhance their earnings and dividends for years to come. Canadian Utilities and ATCO have both suffered lately due to their high exposure to Alberta, where low oil prices have hurt the economy and power prices. However, their new projects should let them continue to raise their dividends....

FORTIS INC., $39.86, Toronto symbol FTS, owns electrical utilities across Canada and in the U.S. and the Caribbean. It also distributes natural gas in British Columbia. The company has completed its latest acquisition in northern B.C.—a 93.8% stake in the Aitken Creek natural gas storage facility. Fortis paid Chevron Corp (New York symbol CVX) $266 million U.S. for the underground complex. To put that in context, Fortis earned $589 million, or $2.11 a share, in 2015. BP Canada owns the remaining 6.2% stake in the B.C. facility. Currently, Fortis leases one-third of Aitken Creek’s capacity. Owning this facility should reduce the company’s costs....

TRANSCANADA CORP. $49.18 (Toronto symbol TRP; Shares outstanding: 709.0 million; Market cap: $34.3 billion; TSINetwork Rating: Above Average; Dividend yield: 4.6%; www.transcanada.com) has run into difficulties lately in gaining approvals for new pipelines, including Energy East in Canada and Keystone XL in the U.S. However, the company has moved forward with its proposed acquisiton of Texas-based Columbia Pipeline Group (New York symbol GPCX) for $13 billion U.S. This is a big purchase for TransCanada, which has a market cap of $35.4 billion (Canadian)....

TRANSCANADA CORP. $49.18 (Toronto symbol TRP; Shares outstanding: 709.0 million; Market cap: $34.3 billion; TSINetwork Rating: Above Average; Dividend yield: 4.6%; www.transcanada.com) has run into difficulties lately in gaining approvals for new pipelines, including Energy East in Canada and Keystone XL in the U.S. However, the company has moved forward with its proposed acquisiton of Texas-based Columbia Pipeline Group (New York symbol GPCX) for $13 billion U.S. This is a big purchase for TransCanada, which has a market cap of $35.4 billion (Canadian)....