TC Energy (TRP.TO)

Enbridge (ENB-T) or TransCanada (TRP-T)? These are both great stocks. Enbridge is a little more expensive at 24X with this one at about 22X. This has some issues on Line 3 with regulators in the US, as to whether or not it goes through. Both have good growth, but Enbridge has the better growth over the next couple of years. He likes the Keystone element and thinks Trump is going to put that through.

TransCanada (TRP-T) or Enbridge (ENB-T) for a 10-year hold? Both companies have done something very interesting by making big US acquisitions. He likes Enbridge because he thinks there is some very good growth and management has been spectacular. Management in this one has not been as consistent.

Great management team. Reasonable valuation to the peer group. There is going to be a lot of pipeline that he is expecting to come online in the next number of years. There is about $25 billion of infrastructure that has been spent, and will be coming online, probably within the next 2 years. There is another $45 billion that is likely coming on in the next 5 years from there. A huge amount of growth in that space. The company has said that they are likely to increase dividends at a 10% clip over the next 5 years. We are also likely going to see Keystone approved. Dividend yield of 3.64%. (Analysts’ price target is $68.31.)

Similar seasonality to oil. The stock has formed a trading range for the last 6 months. If it breaks the trading range it should get to $69, but wait for a confirmation of a breakout where it getting above the resistance level around $61.

Probably one of the beneficiaries of the Trump’s presidency. Trading a lot cheaper than Endbridge at about 8.5%. Just had a large issuance that was slightly dilutive. Their payout ratio is about 47%, while their peers are at about 70%. Thinks they are capable of dividend growth of 8%-10% each and every year through 2025. On a little bit of a pullback you want to be constructive on this.

Will Canadian large cap bilateral companies move to the US with Trump’s dropping of corporate taxes by 15%? These are things that are over the horizon. If it begins to go that way, the Canadian government will have to react. Canada has managed to be lower than the US previously, and we don’t seem to be that concerned about deficits. We have to be competitive with the US on things like this. Thinks our government will react. Feels this company is going to be a big beneficiary of Trump.

The key story here is that they have repositioned the portfolio fairly recently. Made an acquisition, raised some capital, and are going to lock in 8%-10% dividend growth through 2020. Dividend yield of 3.84%. The type of company you just buy and put in your portfolio, and it will continue to reward. (Analysts’ price target is $67.13.)

*Short* half of pairs trade (Top Pick Sept 15/16, Up 1.60%) It is a very levered company. It is excessively valued. This does not make sense in a rising rate environment. The story is Keystone XL, but it would require a lot of Cap-X.

(Market Call Minute.) Most pipeline stocks are selling at very high multiples right now, but they tend to produce very great cash flow, of which they pay a lot out to shareholders. If you think some of these pipelines are going to be approved in Canada, which he does, it is reasonable to hold onto them, because in the meantime you can live with a yield they produce.

If Hillary Clinton wins the election, she thinks pipelines will become more valuable, because it is not expected that she will he be approving any new pipelines. TransCanada has just made an acquisition in the US as there are not going to be that many new pipelines developed in Canada. 5-6 years down the road, those existing pipelines will be even more valuable. Dividend yield of 3.91%.

Just raised $3 billion for an acquisition of a US pipeline. They financed it with debt and equity. Management was going to sell some of their Mexican assets to further pay down the debt, but their Mexican assets are acting so well, and they want to expand in Mexico now, that they decided just to tap the market again. He likes this company.

He was a recent seller of it. He still likes it but it is valuation. If it were to pull back to the mid-$50s he would consider it again.

This is both in the pipeline and power generation businesses. The stock has gone up a lot. A very reliable stock, and one that has increased its dividend on a regular basis. The pipeline is very interesting in that it may be very hard to build another pipeline in Canada. He is not rushing out to sell his holdings.

It is at 25 times earnings and is not cheap for a pipeline. If we go through a period of worry about rising interest rates, there is a likelihood of a correction in the stock. There is no value here.

*Short* (Pairs trade with a long on TA-T). TA-T he was buying as long as a couple of days ago and TRP-T shorting the week before. The ownership of TA renewable in TA-T is worth $7.70 of the share price. At this point the rest of TA-T has a negative value. TRP-T is incredibly expensive. They have excessive debt. They are about to cut the toll of their gas pipeline by 40% which is a major part of their revenue.