transcanada

TRANSCANADA CORP., $49.59, Toronto symbol TRP, recently agreed to buy Texas-based Columbia Pipeline Group (New York symbol GPCX) for $13 billion U.S. That’s equal to 48% of its market cap of $35.1 billion (Canadian). Columbia operates natural gas pipelines in the U.S. Northeast, Midwest, Mid-Atlantic and Gulf Coast regions, as well as underground gas storage terminals. To help pay for this acquisition, TransCanada has sold 96.6 million subscription receipts at $45.75 a share for total proceeds of $4.4 billion. Each receipt will convert to one common share when TransCanada completes the Columbia acquisition, probably by the end of 2016. If it fails to complete the acquisition, the funds will be returned to the subscribers. In the meantime, the holders of these receipts will receive the same dividends as holders of the company’s common shares....

TRANSCANADA CORP., $49.08, Toronto symbol TRP, has agreed to buy Texas-based Columbia Pipeline Group (New York symbol GPCX) for $13 billion U.S. That figure includes $2.8 billion U.S. of Columbia’s debt. This is a big purchase for TransCanada, which has a market cap of $35.4 billion (Canadian). Columbia operates natural gas pipelines in the U.S. Northeast, Midwest, Mid-Atlantic and Gulf Coast regions, as well as underground gas storage terminals. It’s now working on $5.6 billion U.S. worth of new pipelines. Columbia has already secured contracts from gas shippers, which cuts the risk of these projects....

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TRANSCANADA CORP. $49 (Toronto symbol TRP; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 702.3 million; Market cap: $34.4 billion; Price-to-sales ratio: 3.1; Dividend yield: 4.6%; TSINetwork Rating: Above Average; www.transcanada.com) has cancelled its contracts to buy electricity from three coal-fired power plants in Alberta. That’s because higher costs to comply with the province’s new carbon taxes and emission controls have hurt the profitability of these deals. As a result, TransCanada will record a non-cash, after-tax charge of $175 million. That’s equal to 10% of its 2015 earnings of $1.8 billion, or $2.48 a share. However, cancelling these deals will improve its cash flow and earnings. TransCanada is a buy.

TRANSCANADA CORP. $49 (Toronto symbol TRP; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 702.3 million; Market cap: $34.4 billion; Price-to-sales ratio: 3.1; Dividend yield: 4.6%; TSINetwork Rating: Above Average; www.transcanada.com) has cancelled its contracts to buy electricity from three coal-fired power plants in Alberta. That’s because higher costs to comply with the province’s new carbon taxes and emission controls have hurt the profitability of these deals. As a result, TransCanada will record a non-cash, after-tax charge of $175 million. That’s equal to 10% of its 2015 earnings of $1.8 billion, or $2.48 a share. However, cancelling these deals will improve its cash flow and earnings. TransCanada is a buy.

BANK OF NOVA SCOTIA, $59.50, Toronto symbol BNS, reported better-than-expected results this week. It also raised its dividend.

For the fiscal 2016 first quarter, earnings rose 5.1%, to $1.8 billion from $1.7 billion a year earlier. Due to fewer shares outstanding, earnings per share gained 5.9%, to $1.43 from $1.35. That beat the consensus estimate of $1.42.

The bank’s revenue also beat the consensus forecast, of $6.3 billion. It rose 8.6%, to $6.4 billion from $5.9 billion.

Earnings at its Canadian banking division (49% of the total) rose 7.4%. That’s partly due to a $1.7 billion deal with J.P. Morgan Chase to buy its Canadian credit card operations. This includes MasterCard and Sears Canada credit card accounts.

The international division (31% of earnings) reported 20.9% higher profits, thanks to strong loan demand in Latin America and favourable currency rates. However, earnings at the securities-trading division (20%) fell 9.4% on higher loan-loss provisions.

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FORTIS INC., $36.20, Toronto symbol FTS, has agreed to buy ITC Holdings Corp. (New York symbol ITC), which owns 25,100 kilometres of high-voltage power lines in Michigan, Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma. The company is paying $6.9 billion U.S. in cash and shares for ITC. Following the acquisition, ITC shareholders will own 27% of the combined company. Fortis will also list its shares on the New York Stock Exchange; its shares will continue to trade in Toronto. If you include ITC’s $4.4-billion U.S. debt, the total purchase price is $11.3 billion U.S. (or $15.7 billion Canadian). That’s roughly 1.5 times Fortis’s current market cap (the value of all outstanding shares) of $10.3 billion....

ISHARES CANADIAN SELECT DIVIDEND INDEX ETF $20.37 (Toronto symbol XDV; buy or sell through brokers; ca.ishares.com) holds 30 of the highestyielding 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 5.0%. Its top holdings are CIBC, 9.7%; Bank of Montreal, 7.4%; Royal Bank, 6.8%; BCE, 6.5%; Bank of Nova Scotia, 5.6%; Rogers Communications, 5.2%; Laurentian Bank of Canada, 5.0%; Manitoba Telecom, 5.0%; TD Bank, 4.7%; IGM Financial, 4.4%; and TransCanada Corp., 4.4%. The ETF holds 58.6% of its assets in financial stocks. The top Canadian finance stocks have sound prospects, but if you invest in this ETF, be sure to adjust the rest of your portfolio so it won’t be overly concentrated in the financial sector....

We feel that investors will profit the most by holding a well-balanced portfolio of high-quality stocks. However, if you don’t want to build a portfolio, or you want to supplement your individual stock holdings, then ETFs can provide a great alternative. The main factors we use to evaluate ETFs are the stocks they hold, the diversification of their holdings across the five economic sectors and the fees (MERs) they charge. In general, investors holding mainly ETFs would want, say, 60% in Canadian ETFs and 20% to 30% in U.S. ETFs....

TRANSCANADA CORP. $48.05 (Toronto symbol TRP; Shares outstanding: 709.0 million; Market cap: $34.0 billion; TSINetwork Rating: Above Average; Dividend yield: 4.3%; www.transcanada.com) has launched two legal challenges to the U.S. government’s recent decision to block its proposed Keystone XL pipeline, which would have pumped crude oil from Alberta to the U.S. Gulf Coast. The company spent $4.3 billion on Keystone XL and now expects to write off between $2.5 billion and $2.9 billion of this total. TransCanada plans to appeal the U.S. decision under the North American Free Trade Agreement and will ask for $15 billion U.S. in damages. In a separate case, it will challenge the U.S. president’s authority to deny a construction permit....