TRANSCANADA CORP., $62.71, Toronto symbol TRP, operates a 90,300-kilometre pipeline network that pumps natural gas from Alberta to eastern Canada and the U.S. Other operations include 4,250 kilometers of crude oil pipelines and 17 power plants.
This week, U.S. President Donald Trump signed an executive order giving conditional approval to the company’s proposed Keystone XL pipeline. This project would pump crude from Alberta’s oil sands to refineries on the U.S. Gulf Coast.
TransCanada spent $4.3 billion on Keystone XL, but had to write off $2.9 billion of those costs after the Obama administration blocked the plan. To put these figures in context, TransCanada’s market cap (or the value of all outstanding shares) is $53.4 billion.
The company has now re-applied for a permit. However, it’s uncertain when it could resume work. Trump has said he wants to renegotiate the North American Free Trade Agreement. Part of that is re-examining the dispute-settlement rules between Canada, Mexico and the U.S.
As well, TransCanada still needs Nebraska to approve the Keystone pipeline.
Even so, it appears the company will now recoup most of its losses on that project. That will give it more room to increase its $2.26 a share dividend. It yields 3.6%. TransCanada plans to increase the annual rate by 8% to 10% each year through 2020.
OUR RECOMMENDATION: TransCanada is our #1 Income buy for 2017.
TransCanada recent coverage
CANADIAN NATIONAL RAILWAY CO., $92.37, Toronto symbol CNR, operates Canada’s largest railway. Its 32,200-kilometre network stretches across the country and passes through the U.S. Midwest to the Gulf of Mexico.
In the three months ended December 31, 2016, CN’s overall freight volumes rose 3.3% from a year earlier. Higher shipments of metal and minerals, grain and fertilizers, and automotive products offset declines in coal, crude oil, forest products and manufactured goods.
As a result, CN’s revenue in the quarter improved 1.6%, to $3.22 billion from $3.17 billion. That missed the consensus forecast of $3.24 billion.
The company’s earnings for the three months rose 1.2%, to $952 million from $941 million a year earlier. It spent $446 million on share buybacks during the quarter. Due to fewer shares outstanding, earnings per share gained 4.2%, to $1.23 from $1.18. That beat the consensus estimate of $1.21 a share.
CN continues to benefit from lower fuel costs and pension expenses: its operating ratio in the quarter improved to a record 56.6% from 57.2% a year earlier. (Operating ratio is calculated by dividing regular operating costs by revenue. The lower the ratio, the better.)
The company now expects to earn $4.82 a share in 2017, up about 5% from 2016. The stock trades at a still reasonable 19.2 times that forecast.
CN will also raise its quarterly dividend with the March 2017 payment by 10.0%, to $0.4125 a share from $0.375. The new annual rate of $1.65 yields 1.8%.
OUR RECOMMENDATION: CN Rail is a buy.
CN Rail recent coverage
METRO INC., $39.87, Toronto symbol MRU, operates 600 grocery stores and 250 drugstores in Quebec and Ontario.
In its fiscal 2017 first quarter, ended December 17, 2016, Metro earned $131.8 million. That’s down 1.2% from $139.8 million a year earlier. However, due to fewer shares outstanding, earnings per share gained 3.6%, to $0.58 from $0.56. That matched the consensus estimate of $0.56 a share.
Overall sales for the quarter rose 0.3%, to $2.97 billion from $2.96 billion. Same-store sales improved 0.7% from a year earlier. Metro’s recent investments in its stores continue to attract shoppers and offset a 1.0% decline in average food prices. The company also closed some stores in the quarter as its converts them to discount outlets.
Metro also owns 5.7% stake of Alimentation Couche-Tard (Toronto symbol ATD.B). In the latest quarter, earnings from this investment declined 21.9%, to $23.9 million from $30.6 million a year ago. (Couche-Tard, which operates convenience stores in North America and Europe, is a recommendation of Stock Pickers Digest, our newsletter that focuses on aggressive investing.)
Starting with the March 2017 payment, Metro will increase its quarterly dividend by 16.1%, to $0.1625 a share from $0.14. The new annual rate of $0.65 yields 1.6%.
OUR RECOMMENDATION: Metro is a buy.
Metro recent coverage
TECK RESOURCES LTD., $33.12, Toronto symbol TECK.B, is a leading producer of metallurgical coal, a key ingredient in steelmaking. It also produces copper and zinc.
In addition, the company owns 49% of the Wintering Hills wind power project near Drumheller, Alberta. TransAlta Corp. (Toronto symbol TA) owns the remaining 51%.
This week, the two companies agreed to sell Wintering Hills to furniture retailer IKEA Canada.
Teck will receive $58.6 million for its stake when the partners complete the sale in February 2017. To put that amount in context, the company earned $152.0 million, or $0.26 a share, in the three months ended September 30, 2016. Teck has yet to reveal what it plans to do with the cash.
OUR RECOMMENDATION: Teck is a buy.
Teck recent coverage
RIOCAN REAL ESTATE INVESTMENT TRUST, $25.79, Toronto symbol REI.UN, owns all or part of 301 shopping centres in Canada. That includes 15 properties now under development.
The REIT continues to find new tenants for the 26 stores vacated by Target Canada in 2015.
Since then, RioCan has redeveloped many of these large-format stores into multiple outlets. The trust announced this week that it had signed new deals, or is in advanced discussions, on 47 leases for those spaces. By the end of 2017, the trust expects these deals will replace 122% of the annual rental revenue from the former Target stores.
OUR RECOMMENDATION: RioCan is a buy.
RioCan recent coverage
Our next Hotline will go out on Friday, February 3, 2017.
The post The Successful Investor Hotline – Friday, January 27, 2017 appeared first on TSI Wealth Network.