transcanada

TRANSCANADA CORP. (Toronto symbol TRP; www.transcanada.com) operates a 68,500-kilometre pipeline network that pumps natural gas from Alberta to Eastern Canada and the U.S. The company’s pipelines supply 20% of North America’s natural gas. In 2013, they provided 51% of TransCanada’s revenue and 53% of its earnings. The company also owns or invests in power plants in Alberta, Ontario, Quebec and the northeastern U.S. In all, these facilities have over 11,800 megawatts of generating capacity. TransCanada’s electricity operations now supply 36% of its revenue and 30% of its earnings. In 2011, the company started up its oil pipeline division. This business mainly consists of the Keystone pipeline, which pumps oil from Alberta to refineries in Illinois, and a distribution hub in Cushing, Oklahoma. Oil pipelines supply the remaining 13% of TransCanada’s revenue and 7% of its earnings....

Enbridge and TransCanada have risen strongly in recent months. That’s partly because low interest rates continue to encourage income-seeking investors to buy high-yielding utilities.

After their recent gains, both stocks now seem expensive in relation to their earnings....

NORDION INC., $13.89, Toronto symbol NDN, gained 8% this week in response to a new takeover offer. The company recently accepted a $12.25 U.S.-a-share friendly bid from Sterigenics, a privately held Illinois firm that sterilizes surgical tools, drug ingredients and other materials. However, Nordion now says it has received a $12.50-U.S.-a-share offer from an undisclosed bidder. That prompted Sterigenics to raise its bid to $13.00 U.S....

BMO S&P/TSX Laddered Preferred Share Index ETF, $14.48, symbol ZPR on Toronto (Units outstanding: 70.1 million; Market cap: $1.0 billion; www.etfs.bmo.com), holds Canadian floating-rate preferred shares. Issuers include Bank of Montreal, Enbridge, BCE, TransCanada and Canadian Utilities. The ETF’s MER is 0.45%. It currently yields 4.3%. Note that the dividends you receive from this fund do benefit from the Canadian dividend tax credit. Floating-rate preferred shares pay dividends that fluctuate with changes in interest rates. The dividend rate may range from 50% to 100% of (usually) the prime bank rate. As interest rates rise, so do floating-preferred dividend yields....

NEWMONT MINING $24.83 (New York symbol NEM; Shares outstanding: 497.9 million; Market cap: $12.6 billion; TSINetwork Rating: Average; Dividend yield: 0.4%; www.newmont.com) has broken off merger talks with Barrick Gold (Toronto symbol ABX) amid reports of personality conflicts and a failure to agree on key issues such as the location of a new head office and who would lead the combined company. Both Newmont and Barrick have large mining operations in Nevada, so a merger would have let them significantly cut their operating costs. That would have helped the combined firm cope with lower gold prices. Due to weak gold and copper prices, Newmont’s earnings fell 69.4% in the first quarter of 2014, to $108 million, or $0.22 a share. A year earlier, it earned $353 million, or $0.70 a share. Revenue declined 19.4%, to $1.8 billion from $2.2 billion....

CANADIAN PACIFIC RAILWAY LTD., $171.19, Toronto symbol CP, reported better-than-expected earnings this week, despite harsh winter weather that cut shipping volumes and slowed deliveries. In the three months ended March 31, 2014, CP’s earnings rose 17.1%, to $254 million from $217 million a year earlier. Per-share earnings increased at a slower pace of 16.1%, to $1.44 from $1.24, on more shares outstanding. That beat the consensus estimate of $1.41. Revenue rose 0.9%, to $1.51 billion from $1.50 billion. That’s mainly due to higher revenue from shipping consumer and industrial products (up 10.8%) and grain (up 4.1%). These gains offset declines in major areas like fertilizers (down 11.8%), automotive products (down 9.3%), forest products (down 9.4%) and coal (down 0.7%)....

TRANSCANADA CORP. $51 (Toronto symbol TRP; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 707.6 million; Market cap: $36.1 billion; Price-to-sales ratio: 3.8; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.transcanada.com) has received new long-term commitments from U.S. natural gas producers for its ANR pipeline system. Trans- Canada has now sold all of this line’s capacity.

This strong demand should prompt Trans- Canada to expand the ANR line over the next few years. That would let it handle rising production at the Utica and Marcellus shale gas fields in New York State and Pennsylvania.

TransCanada is a buy....

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.

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TRANSCANADA CORP. $51.57 (Toronto symbol TRP; Shares outstanding: 707.5 million; Market cap: $36.0 billion; TSINetwork Rating: Above Average; Dividend yield: 3.7%; www.transcanada.com) operates 68,500 kilometres of natural gas pipelines in Canada and the U.S. It also has interests in over 11,800 megawatts of power generation, including the Bruce Power nuclear plant.

In the three months ended December 31, 2013, TransCanada’s revenue rose 11.6%, to $2.3 billion from $2.1 billion a year earlier. Earnings per share rose 28.9%, to $0.58 from $0.45.

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CANADA BREAD CO. LTD. $73 (Toronto symbol CBY; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 25.4 million; Market cap: $1.9 billion; Price-to-sales ratio: 1.2; Dividend yield: 2.7%; TSINetwork Rating: Above Average; www.canadabread.ca) is Canada’s second-largest producer of fresh and frozen baked goods, after Weston Bakery.

Shareholders recently approved a $72.00-a-share takeover offer from Mexican bakery giant Grupo Bimbo SAB....