transcanada

TRANSCANADA CORP. $41.29 (Toronto symbol TRP; Shares outstanding: 699.5 million; Market cap: $28.9 billion; TSINetwork Rating: Above Average; Dividend yield: 4.1%; www.transcanada.com) is selling 25% of two natural-gas pipelines: Gas Transmission Northwest, which pumps gas from western Canada to Washington State, Oregon and California; and Bison, which pumps gas from Wyoming to markets in the U.S. Midwest. TransCanada will receive $605 million U.S. for these interests. To put that in context, it earned $425 million (Canadian), or $0.61 a share, in the three months ended March 31, 2011. That’s up 29.6% from $328 million, or $0.48 a share, a year earlier. Revenue rose 14.7%, to $2.2 billion from $2.0 billion. The cash from the sale will let TransCanada fund its new growth projects without issuing new common shares....

CGI GROUP INC., $20.70, Toronto symbol GIB.A, is Canada’s largest provider of computer-outsourcing services. The company’s services can automate certain routine functions, such as accounting and buying supplies. That makes its clients more efficient, and lets them focus on their main businesses. In its fiscal 2011 second quarter, which ended March 31, 2011, CGI earned $117.0 million. That’s up 43.4% from $81.6 million a year earlier. Due to fewer shares outstanding, earnings per share rose 50.0%, to $0.42 from $0.28. If you exclude a tax gain, the company would have earned $0.40 a share in the latest quarter. That beat the consensus earnings estimate of $0.38 a share. Revenue rose 24.5%, to $1.1 billion from $910.4 million a year earlier. If you exclude the negative impact of exchange rates, revenue would have risen 27.9%. Canadian revenue rose 4.3%, and U.S. revenue jumped 67.3%, mainly because the company won a number of new contracts from the U.S. federal government....

Brompton Equity Split Corp., $12.97, symbol BE on Toronto (Shares outstanding: 1.7 million; Market cap: $21.9 million; www.bromptongroup.com) mainly invests in large-cap Canadian stocks. The fund was scheduled to wind up on May 31, 2011. However, it now plans to merge with Dividend Growth Split Corp., $9.21, symbol DGS on Toronto (Shares outstanding: 4.3 million; Market cap: $40.0 million; www.bromptongroup.com), on May 18, 2011. The new Dividend Growth Split Corp., symbol DGS on Toronto, will have a termination date of November 30, 2019....

TRANSCANADA CORP. $39 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 699.5 million; Market cap: $27.3 billion; Price-to-sales ratio: 3.4; Dividend yield: 4.3%; TSINetwork Rating: Above Average; www.transcanada.com) operates a 60,000-kilometre pipeline network that pumps natural gas from Alberta to eastern Canada and the U.S. TransCanada also owns, or has interests in, over 10,900 megawatts of power generation. That includes Bruce Power LP, a nuclear facility in Ontario, and the Ravenswood facility, which serves New York City. TransCanada has spent about $10 billion of the $20 billion it has set aside for new growth projects. It will spend the remaining $10 billion over the next two years. Its biggest project is the Keystone pipeline, which it is building in three phases. Keystone’s first phase is now pumping crude oil from Alberta to refineries in Illinois. The second phase will extend to Oklahoma, and should be ready in 2011. The third phase, called Keystone XL, will pump oil to refineries in Texas. U.S. environmentalists and politicians have criticized this project. Even so, TransCanada aims to finish Keystone XL by the end of 2013....

These three utilities are using the steady cash flows from their regulated businesses to invest in new projects. That should spur their long-term earnings, and give them more cash to keep raising their dividends. TRANSCANADA CORP. $39 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 699.5 million; Market cap: $27.3 billion; Price-to-sales ratio: 3.4; Dividend yield: 4.3%; TSINetwork Rating: Above Average; www.transcanada.com) operates a 60,000-kilometre pipeline network that pumps natural gas from Alberta to eastern Canada and the U.S. TransCanada also owns, or has interests in, over 10,900 megawatts of power generation. That includes Bruce Power LP, a nuclear facility in Ontario, and the Ravenswood facility, which serves New York City. TransCanada has spent about $10 billion of the $20 billion it has set aside for new growth projects. It will spend the remaining $10 billion over the next two years. Its biggest project is the Keystone pipeline, which it is building in three phases....

ENCANA CORP. $33.69 (Toronto symbol ECA; Shares outstanding: 735.3 million; Market cap: $24.9 billion; TSINetwork Rating: Average; Dividend yield: 2.4%; www.encana.com) is paying an undisclosed sum for a 30% stake in a proposed liquefied natural gas (LNG) terminal in Kitimat, B.C. Pipelines will pump gas from big new discoveries in the Horn River area of northeastern B.C. to the Kitimat terminal, which will then convert the gas into a liquid form. From there, tankers will ship the LNG to markets in Asia. Regulators must still approve the project, but exports could start in 2015. Encana is a buy....

The stock market put on a huge rise from mid-2010 through February this year, and this left it ripe for a setback. Japan’s earthquake/tsunami/nuclear plant breakdown provided the trigger for that setback. Events in Japan have been horrific for the victims, of course. The Japanese situation could still weigh on the market for weeks or months to come. However, the damage to Japan is far too isolated and local to put the worldwide economic recovery at risk. World economic growth could slow temporarily while multi-national companies re-think their hiring and investment plans, and consumers re-think major purchases. After they complete their re-thinking, businesses and consumers may speed up their spending to make up for lost time. The outcome of Japan’s nuclear problems could have a big impact. If radiation leakage is widespread, it could spur much more environmental opposition to the nuclear industry. That could shift demand from nuclear to natural-gas power plants, particularly since shale gas discoveries and technology have vastly expanded natural gas reserves in North America and around the world. (One key beneficiary would be our long-time favourite, Encana – see below.)...

Dividend 15 Split Corp., $12.30, symbol DFN on Toronto (Shares outstanding: 13.6 million; Market cap: $167.3 million; www.dividend15.com), is a split-share investment corporation that holds shares of 15 companies: BCE Inc., CI Financial Corporation, Bank of Nova Scotia, Thomson Reuters, National Bank of Canada, TransAlta Corporation, Sun Life Financial, Canadian Imperial Bank of Commerce, TransCanada Corporation, Manulife Financial, TD Bank, Royal Bank of Canada, Bank of Montreal, Telus Corporation and Enbridge. The company can also invest up to 15% of its portfolio in other stocks. Dividend 15 Split Corp. has two share classes: Dividend 15 Split Corp. capital shares (Toronto symbol DFN), and Dividend 15 Split Corp. preferred shares (Toronto symbol DFN.PR.A)....

TRANSCANADA CORP. $38.61 (Toronto symbol TRP; Shares outstanding: 693.0 million; Market cap: $26.8 billion; TSINetwork Rating: Above Average; Dividend yield: 4.4%; www.transcanada.com) reports that its revenue rose 3.6% in the three months ended December 31, 2010, to $2.1 billion from $2.0 billion a year earlier. Earnings per share rose 14.6%, to $0.55 from $0.48, due to lower costs and higher production at Bruce Power. The higher results prompted TransCanada to raise its quarterly dividend by 5.0%, to $0.42 a share from $0.40. The new annual rate of $1.68 yields 4.4%. TransCanada trades at 17.7 times its forecast 2011 earnings of $2.18 a share. TransCanada is a buy.

A key part of our three-part tsinetwork.ca investment strategy is to diversify by spreading your money out across the five main economic sectors (Manufacturing & Industry; Resources; Consumer; Finance; and Utilities). (The other two parts are to stick with well-established, dividend-paying companies, and downplay stocks in the broker/public-relations limelight.) Generally speaking, stocks in the Resources and Manufacturing & Industry sectors expose you to above-average volatility, and stocks in the Utilities and Canadian Finance sectors entail below-average volatility. Consumer stocks fall somewhere in the middle....