transcanada

Meta Description: Exchange-traded funds (ETFs) give investors a low-fee way to match market indexes, and these two ETFs are the cream of the Canadian crop.

TRANSCANADA CORP. $56.04 (Toronto symbol TRP; Shares outstanding: 708.9 million; Market cap: $40.4 billion; TSINetwork Rating: Above Average; Dividend yield: 3.7%; www.transcanada.com) has announced a new deal with Magellan Midstream Partners (New York symbol MMP). The two firms have formed a 50/50 partnership to build a pipeline connecting their oil-storage facilities in Houston, Texas. This will give TransCanada’s oil-shipping clients access to more refineries in the Houston area. The company’s share of the $50-million cost is $25 million. To put that in context, TransCanada earned $511 million, or $0.72 a share, in the three months ended December 31, 2014. The partners expect to complete this project in mid-2016....

ISHARES CANADIAN SELECT DIVIDEND INDEX ETF $23.80 (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 4.2%.

The fund’s top holdings are CIBC, 8.4%; Bank of Montreal, 6.3%; Royal Bank, 6.1%; Bank of Nova Scotia, 5.3%; BCE, 5.1%; IGM Financial, 4.7%; Ag Growth International, 4.4%; Laurentian Bank of Canada, 4.3%; TransCanada Corp., 4.2%; and TD Bank, 4.0%.

The ETF holds 53.5% of its assets in financial stocks. The top Canadian finance stocks have sound prospects. However, 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.

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While this split-share company dabbles in call options, investors would be better off buying the bank and oil stocks it holds separately.

TRANSCANADA CORP., $56.42, Toronto symbol TRP, has announced a new deal with Magellan Midstream Partners (New York symbol MMP). The two firms have formed a 50/50 partnership to build a pipeline connecting their oil-storage facilities in Houston, Texas. This will give TransCanada’s oil-shipping clients access to more refineries in the Houston area. The company’s share of the $50-million cost is $25 million. To put that in context, TransCanada earned $511 million, or $0.72 a share, in the three months ended December 31, 2014. The partners expect to complete this project in mid-2016....

TRANSCANADA CORP. $55 (Toronto symbol TRP; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 708.9 million; Market cap: $39.0 billion; Price-to-sales ratio: 4.7; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.transcanada.com) has decided not to build an oil-export terminal at Cacouna, Quebec, due to concerns that it could endanger beluga whales in the St. Lawrence River. This terminal was one of two (the other is near Saint John, New Brunswick) that are part of TransCanada’s proposed Energy East pipeline project, which would pump crude oil from Alberta to refineries in Eastern Canada. TransCanada is now looking for an alternative site. That will delay Energy East for at least two years, to 2020, and add to its $12-billion cost. However, cancelling the Cacouna terminal makes it more likely that regulators will approve the project....

Exchange traded funds (ETFs) are set up to mirror the performance of a stock market index or sub-index. They hold a more or less fixed selection of securities that represent the holdings that go into the calculation of the index or sub-index. ETFs trade on stock exchanges, just like stocks. That’s different from mutual funds, which you can only buy at the end of the day at a price that reflects the fund’s value at the close of trading. Prices of ETFs are quoted in newspaper stock tables and online. You pay brokerage commissions to buy and sell them, but their low management fees give them a cost advantage over most mutual funds....

Big Bank Big Oil Split Corp. is a split-share company with two types of stock: capital shares ($9.32, symbol BBO on Toronto) and preferred shares ($10.21, symbol BBO.PR.A on Toronto).

The company holds shares of the biggest six Canadian banks, plus 10 large Canadian oil and gas and pipeline companies.

Split-share companies typically issue two classes of shares. Usually the capital shares get all or most of the capital gains and losses, as well as variable dividend income, and the preferred shares get a fixed amount of dividend income.

In the case of Big Bank Big Oil Split, the capital shares receive a monthly dividend of $0.05 a share ($0.60 annually), which gives them a 6.4% yield. The monthly dividend has been as high at $0.09, most recently in 2010.

The dividend income the company gets from its portfolio isn’t enough to pay capital and preferred share dividends and management expenses of 1.22%, in addition to providing a return for the capital shares. To make up the difference, the company has to make a profit by trading its portfolio. It also aims to raise its returns by writing call options on the portfolio’s securities.

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TRANSCANADA CORP. $54 (www.transcanada.com) has increased its quarterly dividend by 8.3%, to $0.52 a share from $0.48. The new annual rate of $2.08 yields 3.9%. TransCanada has raised its payout each year since 2000. Best Buy.

TELUS CORP. $42 (www.telus.com) is paying $1.5 billion for new radio frequencies (or spectrum) covering urban and rural areas in Western Canada, Ontario and Quebec. The price is slightly more than the $1.49 billion, or $2.41 a share, that Telus earned in 2014. However, the company can use the extra spectrum to speed up its wireless networks. That will help it meet growing demand for wireless downloads, as 81% of its subscribers under long-term contracts now use smartphones. Buy. ENBRIDGE INC. $58 (www.enbridge.com) plans to increase the capacity of a proposed pipeline project that will pump crude from oil sands projects in Alberta. It will mainly do this by increasing the diameter of part of the pipeline and boosting another section’s pumping power. These moves will also cut the project’s overall cost by $400 million, from $3.0 billion to $2.6 billion. To put these figures in context, the company earned $1.6 billion, or $1.90 a share, in 2014. Buy. TRANSCANADA CORP. $54 (www.transcanada.com) has increased its quarterly dividend by 8.3%, to $0.52 a share from $0.48. The new annual rate of $2.08 yields 3.9%. TransCanada has raised its payout each year since 2000. Best Buy....