transcanada

TORSTAR $5.69 (Toronto symbol TS.B; Shares outstanding: 79.9 million; Market cap: $458.5 million; TSINetwork Rating: Above Average; Dividend yield: 9.2%; www.torstar.com) reported lower-than-expected earnings in the latest quarter.

In the three months ended June 30, 2013, Torstar’s earnings fell 44.7%, to $18.0 million, or $0.23 a share, from $32.6 million, or $0.41, a year earlier....

TRANSCANADA CORP. $46 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 707.0 million; Market cap: $32.5 billion; Priceto- sales ratio: 3.9; Dividend yield: 4.0%; TSINetwork Rating: Above Average; www.transcanada.com) operates a 57,000- 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 2012, they provided 53% of TransCanada’s revenue and 60% of its earnings.

The company also owns or invests in 21 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 34% of its revenue and 21% 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 19% of its earnings.
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CANADIAN PACIFIC RAILWAY LTD., $131.73, Toronto symbol CP, continues to benefit from rising shipments of crude oil by rail. That’s because a lack of pipelines is forcing producers to find other ways to transport their oil to refineries. However, last Saturday’s derailment and explosion of a train hauling crude oil in Lac-Mégantic, Quebec, could slow down the oil-by-rail boom. (Note: a rival firm, Montreal, Maine & Atlantic Railway, operated this train, not CP.) The crash will likely lead to new regulations, such as requirements for thicker-hulled tanker cars that can better withstand collisions. Regulators may also demand that railways place more workers on their trains and install automatic braking equipment....

TransCanada is down 10% from its peak of $51 in May 2013. That’s mainly because the likelihood of higher interest rates has made dividend-paying stocks less appealing to income-seeking investors. Uncertainty over TransCanada’s proposed Keystone XL pipeline, which would pump crude from Alberta to refineries on the U.S....

The July 6, 2013 derailment and explosion of a train in Lac-Mégantic, Quebec has implications for both CP and TransCanada (see left).

CANADIAN PACIFIC RAILWAY LTD. $129 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 175.0 million; Market cap: $22.6 billion; Price-to-sales ratio: 3.9; Dividend yield: 1.1%; TSINetwork Rating: Above Average; www.cpr.ca) expects to ship 70,000 carloads of crude oil in 2013, up sharply from just 13,000 in 2011.

However, the crash could hurt the oil-by-rail boom....

As is the case with TransCanada (see page 71), fears of higher interest rates have hurt these four power utilities. However, their high quality, mostly regulated operations will keep giving them plenty of steady cash flows for dividends.

CANADIAN UTILITIES LTD....

TRANSCANADA CORP., $45.59, Toronto symbol TRP, has completed the purchase of a solar power facility in Brockville, Ontario, from Canadian Solar (Nasdaq symbol CSIQ). This is the first part of TransCanada’s agreement to buy nine Ontario solar power stations from Canadian Solar. The company expects to take possession of the remaining eight facilities by the end of 2014. In all, TransCanada will pay $470 million. That’s equal to 1.3 times the $370 million, or $0.52 a share, that the company earned in the three months ended March 31, 2013....

TRANSCANADA CORP. $46.23 (Toronto symbol TRP; Shares outstanding: 707.0 million; Market cap: $33.5 billion; TSINetwork Rating: Above Average; Dividend yield: 4.0%; www.transcanada.com) plans to build a new 200-kilometre crude oil pipeline that will connect Edmonton to the storage hub at Hardisty, Alberta. From there, TransCanada will pump the oil to refineries in the U.S. Midwest through its Keystone pipeline (and link up later with its Keystone XL pipeline if it’s built).

The $900-million project also includes a new oil-storage facility. The company already has long-term contracts from producers, which cuts the risk of this investment. The new line should begin operating in the second half of 2015.

TransCanada is a buy....

TRANSCANADA CORP. $46.23 (Toronto symbol TRP; Shares outstanding: 707.0 million; Market cap: $33.5 billion; TSINetwork Rating: Above Average; Dividend yield: 4.0%; www.transcanada.com) plans to build a new 200-kilometre crude oil pipeline that will connect Edmonton to the storage hub at Hardisty, Alberta....

TRANSCANADA CORP. $49 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 707.0 million; Market cap: $34.6 billion; Price-to-sales ratio: 4.2; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.transcanada.com) plans to build a new 200- kilometre crude oil pipeline that will connect Edmonton to the storage hub at Hardisty, Alberta. From there, TransCanada will pump the oil to refineries in the U.S. Midwest through its Keystone pipeline.

The project, which will cost $900 million, also includes a new oil-storage facility. The company already has long-term contracts from producers, which cuts the risk of this investment. The project should begin operating in the second half of 2015.

These investments will help TransCanada handle rising production from Alberta’s oil sands. The new system will also help support its proposed Keystone XL pipeline extension. This project, which requires U.S. government approval, would pump oil to refineries on the U.S. Gulf Coast.
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