TC Energy (TRP.TO)

What company do you prefer CN Rail (CNR-T) or TransCanada (TRP-T)? He likes both. Near term he likes a little more Transcanada (TRP-T) as it is an asset class that is in shortage now. CN Rail (CNR-T) took the cost cutting a little too far and is struggling a little but long term they are a great business.

The entire pipeline sector faces higher interest rates and oil price pressure. When TRP's big pipeline projects finally happens, though, it will benefit grreatly. But the next while will be volatile.

Pipeline companies need a lot of cash to fund pipelines. The investment community is suspicious of TRP because the price of oil and gas are declining and then there's U.S. competition. But TRP finally has approval to build Keystone. Will see dividend growth. Nibble at this.

It has been the better performer over ENB-T. Their business is firing on a lot of cylinders. They are busy in Mexico and the gulf coast as well. Keystone makes more sense every day. There is a potential LNG announcement in June by Shell. You could see two big projects back on the table for TRP-T. ENB-T is a better value, however.

Is this a good time to buy? He owns other pipeline companies. As interest rates begin to rise, investors start to worry as they are big borrowers. As bond yields go up, this sector will see money leave. Attractive yield and is okay to own. Yield 4.8%.

Enbridge Inc (ENB-T) vs TransCanada (TRP-T). He only owns ENB-T and definitely prefers it to TRP-T. ENB-T made a major acquisition last year with Spectra Energy and has been selling assets to bring down debt. If Line 3 expansion will be allowed it will be a good hold. Yield 6.2%.

It passed Enbridge but has sold down quite a bit in past weeks. Past decade has seen consistent revenue growth. Had blacklog of $24 million worth of projects that will come online in three years in the U.S. and Canada. Will access to U.S. shale. Predicts 10% earnings growth and dividends continue to rise. Expects Keystone to get built. (Analysts' price target $71.35)

4.9% 15 1^st Preferred. (A Top Pick Feb 2/17, Up 0.93%) When they re-do their issue it will come with a 3.8% spread. This is a fixed rate reset. It has a floor yield 4.9%. Where income and capital preservation is a focus this one is great.

Sell? The price has pulled back a lot, and he thinks it is going to underperform the market for some time. (See Top Picks.)

All the energy infrastructure and pipelines have pulled off a little, with higher interest rates. There is commercial support now for Keystone, which gives another $2-$6 to the stock. Even without that, he sees this probably going to $72 over the next 12 months. The company indicated they are going to grow their dividend 8%-10% out to 2021. 60% payout ratio. He models 8% earnings per share growth. On these higher interest rate concerns, you can be buying at this time, or better yet, Sell a Put and oblige yourself to own it at $55 and get paid a nice little premium. Dividend yield of 4.3%.

If prices go back up to a certain level, people start selling to make themselves whole if they had bought at higher levels previously. This is exactly what is going on with this. You have over a year of investors being underwater. Unfortunately, he believes the next move is lower.

For a TFSA? Good company, steady, nice dividend. They've grown their dividend over the years. An appropriate investment. Expects it to grow by share price and dividend by about 8%-10% a year for the foreseeable future. It would be better in an RRSP or RIF account. Investments with a higher possibility of a rate of return, should be in the TFSA, and companies like this with a fixed income, really should be in an RRSP or RIF.

Over the last 2-3 years, this has had a pretty good run. Had a pullback in the last 6 months, but longer-term it’s a good opportunity. Pipelines tend to be more stable assets that benefit you when the market goes down. When we go into recession, these assets will hold up because it is a pretty steady business. A lot of institutional managers are taking there weighting down a little, so in the short term there has been some pressure for underperformance in the sector. Long-term, this is a good sector to invest in.

Pipelines? Canada is producing way more oil than what we can get out, so there is a long-term demand for pipeline capacity. Because of a tight Canadian market, they are expensive on a global basis. This has made big US acquisitions, because US companies are cheaper. The outlook for projects in all these companies is very strong. You should be fine in any of them.

As bullish as he is on increasing rates, and rates are going up, this sector will be hurt more than any other because a lot of interest rate refugees have kind of pumped the valuation of all of these stocks, including telephone utilities. Valuations doesn’t make a whole lot of sense. There is a lot of pressure on these stocks going forward. He wouldn't touch this until it went down to $41.