TransCanada is a leading energy infrastructure company in North America. The company moves more than 25% of natural gas consumed daily across North America.
TransCanada has a strong portfolio of diversified assets, storage facilities and power generation plants. The company operates a safe and stable network of 57,500 miles of natural gas and 3,000 miles of crude oil pipelines. Its pipelines connect major basins to key markets across North America. The company also operates 6,600 megawatts of wind and nuclear power facilities. By generation type, TransCanada’s assets can be divided into nuclear (51%), natural gas (43%) and wind (6%).
TransCanada runs five operating businesses – Canadian Natural Gas Pipelines (28% of EBITDA), US Natural Gas Pipelines (35%), Mexico Natural Gas Pipelines (7%), Liquids (21%) and Energy (9%), across the USA (52% of EBITDA), Canada (40%) and Mexico (8%). The company caters to a diversified customer base and provides the key transportation path to large demand centres across the three geographies.Investment Data
- Opportunity Score: 78%
- Ticker: TSE:TRP
- Sector: Energy
- Industry: Oil & Gas - Midstream
- Market Cap: 54.54B
- P/E: 15.21
- Dividend Yield: 5.02%
- Dividend Payout Ratio: 76.34%
- FFO Payout Ratio: Dividend Snapshot Members Only
- FCF Payout Ratio: Dividend Snapshot Members Only
- Chowder Score: Dividend Snapshot Members Only
Revenue Growth & Market Exposure
With more than 65 years of service, TransCanada has earned itself the reputation of one of North America’s largest natural gas pipelines operators. Its assets have grown to $99 billion from $26 billion, since 2000. It has completely transformed itself from a predominantly pipeline business into an energy infrastructure company. In fact, TransCanada is even intending to change its name to TC Energy to better reflect the scope of its operations.
TransCanada derives over 95% of its EBITDA from regulated assets or long-term contracts. The business is highly diversified by assets, customers and geographies. The company has a strong and visible project pipeline of $36 billion in secured growth projects, out of which $20+ billion of projects are under development. It is strategically developing its pipelines connecting major supply basins with growing power generation, industrial and other key markets.
TransCanada’s assets are highly strategic in nature with access to North America’s two most prolific natural gas supply basins. Its Keystone Pipeline transports nearly one-fifth of Western Canada’s crude oil exports to the U.S. Midwest and Gulf Coast.
TransCanada continues to constantly invest in improving its methods of efficient extraction and transportation to drive operational efficiency and reduce cost. The company has invested more than $142 million in technology development over the last five years and ranks amongst Canada’s Top 100 corporate R&D spenders.
The company is trusted nationwide for safe and reliable delivery of energy to millions of people every day. As one of the leading operators of natural gas assets, TransCanada is in a good position to benefit from natural gas demand growth outlook in North America.
TransCanada has been continuously growing its dividend over the last 18 years, increasing it to $3 from just $0.80 per share back in 2000. The company’s last dividend raise was 8.7% with a dividend yield of over 5%. This dividend aristocrat has compounded its dividend growth at 9% per annum over the last three years.
The company has maintained an impressive average annual shareholder return of 12% in the last 18 years and has grown both its earnings and funds from operations on an annual basis (in 2018).
TransCanada aims at growing its dividend at an average annual rate of 8%-10% through 2021, driven by a strong project pipeline and growth in its diverse business segments. The company’s portfolio underpinned by long‐term contracts with solid counter-parties, grants enough cash flow visibility. There is high visibility to sustained EBITDA even into the next decade. Easy access to capital markets and strong, predictable and growing cash flow from operations further secures the future dividend growth.
As a leading energy player in North America, The company stands a good chance to benefit from significant power generation opportunity in the nation. A large portfolio of energy assets, strong future growth projects, and an extensive geographic footprint forms a deep moat around TransCanada’s business.
Enbridge is Canada’s largest natural gas distribution provider while Pembina Pipeline is a leading midstream and transportation service provider in North America. Inter Pipeline is an integrated energy infrastructure company in Canada, and Keyera’s integrated business, strategic locations, and large scale differentiate it from peers. TransCanada’s well-distributed footprint of natural gas pipelines and growing presence in the Appalachian region grants it a strong competitive edge over peers.
|ENB||Enbridge||Energy||Oil & Gas - Midstream||66%||$47.56||100.14||32.58||19.83||$1.46||6.21%||202.19%||4||$2.95||20.11%||1|
|TRP||Transcanada Pipelines||Energy||Oil & Gas - Midstream||78%||$59.78||54.54||15.21||15.64||$3.93||5.02%||76.34%||4||$3.00||11.30%||1|
|PPL||Pembina Pipeline||Energy||Oil & Gas - Midstream||63%||$49.48||24.85||21.7||21.10||$2.28||4.61%||100.00%||12||$2.28||8.67%||1|
|IPL||Inter Pipeline Ltd||Energy||Oil & Gas - Midstream||73%||$21.69||8.75||14.18||16.49||$1.53||7.88%||111.76%||12||$1.71||14.74%||1|
|KEY||Keyera Corp||Energy||Oil & Gas - Midstream||80%||$32.86||6.90||17.2||19.51||$1.91||5.48%||94.24%||12||$1.80||13.96%||1|
|ALA||AltaGas||Energy||Oil & Gas - Midstream||58%||$17.75||4.88||-||18.42||($1.46)||5.41%||100.00%||12||$0.96||5.65%||1|
|GEI||Gibson Energy Inc.||Energy||Oil & Gas - Midstream||48%||$21.79||3.10||66.03||27.49||$0.33||6.06%||400.00%||4||$1.32||9.29%||1|
TransCanada possesses one of North America’s largest energy infrastructure portfolios and plays a critical role in powering the daily lives of people. Ownership of three complementary energy infrastructure businesses across the three core geographies in North America imparts the much-needed diversification to the energy business. Regulated businesses and long‐term contracts further ensure safe and secure cash flows. The company has a clear dividend growth plan supported by strong assets and continued expected growth across each of its business lines.
DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.