TransCanada (Symbol-TRP)

[arthur]

Decartes, I am rearranging a very large Portfolio, looking at Yield and Safety of underlying asset.

Bonds/stocks have always paid a risk/reward return, and I am somewhat confused by more than 100% premium for some stock dividends over near term Bond Yields???

Pfizer, TRP, BCE and others are paying such a large premium over what a near term bond pays, what is the message of the market, which is overpriced, which is underpriced??

XDV, a basket of Div stocks pays a little over 4%, which means if BCE et al are almost at 5%, many others must be at 3%, which either means Bond Rates are due to go up, or stock prices will go up resulting in a lower Yield??

[glenfro]

How safe is that generous dividend, and if they wanted to raise cash, cut the dividend to 3%

Cutting the div to 3% would mean a 40% reduction....not bloody likely, at least according to Bob Hastings.

Anyway, what'cha gonna do with the proceeds from a sale, buy GICs?

[adrian2]

Decartes, I am rearranging a very large Portfolio, looking at Yield and Safety of underlying asset.

The name is Descartes, a.k.a. the Father of Modern Philosophy.

Bonds/stocks have always paid a risk/reward return, and I am somewhat confused by more than 100% premium for some stock dividends over near term Bond Yields???

You must have skipped a History class.

Pfizer, TRP, BCE and others are paying such a large premium over what a near term bond pays, what is the message of the market, which is overpriced, which is underpriced??

I could tell you, but I'd have to shoot you afterwards.

[Mike Schimek]

Bonds/stocks have always paid a risk/reward return, and I am somewhat confused by more than 100% premium for some stock dividends over near term Bond Yields???

Pfizer, TRP, BCE and others are paying such a large premium over what a near term bond pays, what is the message of the market, which is overpriced, which is underpriced??

IMO;

... stocks are overpriced compared to their current earnings



... bonds are overpriced because of expected higher future interest rates



... cash is overpriced because of inflation expectations down the road




All this is (IMO) caused by government interference in markets, keeping interest rates artificially low and distorting everything in its efforts to prevent deflation by dropping money from helicopters.

That's why everything is so confusing.

Everything should be overpriced and heading downwards in price, yet it's all being propped up artificially by an easy money policy and low interest rates.

IMO if you can nimble and figure out how to benefit from all the confusion, you can thrive amidst the chaos and make a lot of dough.

[newguy]

Bonds/stocks have always paid a risk/reward return, and I am somewhat confused by more than 100% premium for some stock dividends over near term Bond Yields????

You reminded of some charts I came across the other day. Source. It compares the valuation now (nov. 2008) to historical bond/div yields.

newguy

edit: oyu're supposed to click pb1 first, then say "wow where are we now", then click pb2

[glenfro]

Bonds/stocks have always paid a risk/reward return, and I am somewhat confused by more than 100% premium for some stock dividends over near term Bond Yields???

That's the beauty of being able to take advantage of those subtle discrepencies that the market occasionally taunts us with.

Although yields from top rated bonds rarely approach the level of dividends from utility stocks, I think we need to realise that the credit crunch has wreaked a lot more havoc with the bond market than with utility and pipeline stocks with controlled expenditure and stable earnings.

Sure, the gap may eventually narrow, but I would bet on yields from div stocks declining from prices driven up by income starved investors before the return of stability to the bond market any time soon.

[Shakespeare]

TransCanada: long-term value, natural gas play

“We believe that the low valuation multiple and the underperformance versus the broader market limits the downside in the stock,” the analyst said.

RBC rates TransCanada Outperform with a $38 price target, representing upside of roughly 12%.

Disclosure: I have a position in this stock.

[Michael D]

Keystone Approved

Good news.

[Subby]

Is there any merit to the arguments made by Waxman et al in regards to the viability of the Keystone XL pipeline?

http://www.reuters.com/article/idAFN061 ... 706?rpc=44

[AltaRed]

To some extent, probably. On one side, Cdn oil sands crude simply displaces crudes of similar nature from other sources and refineries are configured to handle these crudes, and have the most profit margin paying less for these kinds of crudes. On the other side, continuing to access 'dirtier' crudes does not help the Obama GHG agenda at all, nor reduce reliance on 'foreign oil'. Ultimately, I think Keystone will go BUT it is not a given. I wouldn't bet on it happening, at least not on the time schedule currently assumed, nor maybe in the size currently proposed.

[AltaRed]

A very good reason for TRP to diversity into oil transportation and electric power is due to dramatically falling throughput in TRP's mainline gas pipeline business. It is serious if producers and TRP cannot come to some mutual agreement to avoid the death spiral. Utimately TRP is going to have to accept less revenue from tolls on its Chicago destined business. Conversion to oil transportation may be one option depending on the unamortized value of the pipe itself, but a significant new expense would be required to replace compressor stations with pumping stations. I would not want to be in the CEO's shoes at the current time.

[schmuck]

Haven't had the opportunity to pick up many rumors on BNN lately, but found David Baskins comment on Stockchase quite interesting that our oil sands stocks should recover nicely after the congressional election in November.

I've got my stink bids in ambush mode just in case the political BS hasn't reached fever pitch yet along with the usual October jitters.

One stock that has presented a tantalyzing target to those devious campainers is TRP with it's Keystone proposal all set to carve up the turf under the stars & stripes, and if Mr. Baskin, Levine, Graham, and Stephenson are correct in shrugging off the political opposition as utter nonsense, it could be a helluva buy....with some help from those October jitters of course.

[Profit not Prophet]

A few positive comments for TRP means I have to dump a load of bad just to even things out a bit. Anyone care to chat the changing market place up?

http://business.financialpost.com/2010/ ... placement/
or tiny url of http://tinyurl.com/2dernqq

In a nutshell 'Western Canadian natural gas exports to the United States and Northern California in particular could be completely displaced by abundant, low cost gas production and several new gas pipelines in the United States, says a new study by energy analysis firm Bentek.'

Read more: http://business.financialpost.com/2010/ ... z16DKVxDGr

[Shakespeare]

That's going to murder the Alberta budget, which is highly dependent on NG.

As for TRP, I've recently looked on it for trading around a central position - add below $30, sell near $40.

[newguy]

The story seems strange to me. I'm not so sure the new gas wells are profitable at these prices. There was a huge word war about this last year.
Anyway here's a chart of AECO - Henry Hub.
Why is gas more expensive in Canada now? Where can they be selling it? Maybe it's Canada lowering rigs while the US is inexplicably drilling more.

“It’s pretty unusual to see Canadian gas becoming more expensive,” said Martin King, an analyst at FirstEnergy Capital Corp. in Calgary. Exporting to the U.S. “hasn’t been financially attractive.”

There were 163 rigs drilling for gas in Canada in the week ended Nov. 12, according to Houston-based Baker Hughes Inc., down 10 percent this year. U.S. gas rigs totaled 955, up 27 percent in 2010.

Horizontal rigs, which are mostly used for shale-gas drilling, fell by three from a record high to 940.

newguy

[bardel]

That's going to murder the Alberta budget, which is highly dependent on NG.

As for TRP, I've recently looked on it for trading around a central position - add below $30, sell near $40.

Alberta has given up on collecting significant royalties on natural gas. Budget for this fiscal year for natural gas and by-products is $1.8 billion on non-renewable resource revenue totalling $7.7 billion. They collect more royalties on conventional oil and bitumen.

Here is the link to the Alberta 2010-2011 budget:

http://www.finance.alberta.ca/publications/budget/quarterly/2010_2ndq/report.pdf

[Michael D]

What do others think of this right now? Forward P/E over 16, on its 52 week high and coming off a relatively flat quarter. Dividend will increase 5% to 1.68, yielding 4.2% on the 52 week high price.

Not bad. Maybe I'm bored

[Shakespeare]

I sometimes trade this one around a core position, adding at $30 and subtracting just below $40. But I already subtracted the extra shares.

[Taggart]

What do others think of this right now? Forward P/E over 16, on its 52 week high and coming off a relatively flat quarter. Dividend will increase 5% to 1.68, yielding 4.2% on the 52 week high price.

Not bad. Maybe I'm bored

Aside from the dividend yield I don't find TRP all that cheap. I'm also very wary about it, since the Consolidated Cash Flows Statement has been showing negative free cash flow for the last two years. For me, it's not a good sign, and it can't go on forever. So far, still own the stock.

[Michael D]

S&P has a $44.00 12 month price target. Payout ratio is over 90%. Cash on the balance sheet looks like an afterthought, with quick ratio of .57 and lots of long term debt.

Does this make it an interest-rate sensitive utility? Capital expenditures are significant, and should (?) increase cash flows. But this banks on the Keystone II project (S&P likes it)

[AltaRed]

Does this make it an interest-rate sensitive utility?

Of course, like virtually all utilities. That is why they are called interest rate sensitive stocks.

[JaydoubleU]

S&P has a $44.00 12 month price target.

Wouldn't that be $44 US? Or closer to $42 CAD.... Thinking of trimming TRP, Michael?

[Michael D]

I don't really have a lot to trim, it was a small position, now is a correct position.

On the other hand, if this news offers a bump on Monday, it would be interesting. But in complaining about the high P/E, it suggests that the news below is already positively reflected in the price of the stock. There is still substantial downside if an appeal overturns, plus an interest hike.

TransCanada’s Keystone XL clears hurdle

The U.S. State Department has rejected many of the key arguments of opponents of TransCanada Corp.’s (TRP-T40.070.380.96%) Keystone XL pipeline, setting the stage for the likely approval of the project later this year.

In a draft environmental impact statement issued Friday, the department highlighted the growing demand for a “stable and reliable” source of Canadian crude among U.S. Gulf Coast refiners, which now rely heavily on imports from offshore.

[schmuck]

Setting the stage for likely approval of the Keystone project???

No shit!
With reliance on Middle East oil becoming more scary by the day, with nuclear energy not looking so good as an alternate source, and with off-shore oil from the Gulf posing an even bigger environmental threat, it's a no brainer. In fact, if it wasn't for saving political face, they (U.S.) would not only be begging TRP to proceed with Keystone, but could be persuaded to share the bloody cost.

Throw in the fact that nat gas has nowhere to go but up, I'm surprised that investors are still hung up on trailing rather than projected earnings.

[Taggart]

..... I'm surprised that investors are still hung up on trailing rather than projected earnings.

Perhaps because I'm a tad pessimistic about analysts abilities in accurately predicting future earnings, in fact future anything.