If you can’t build ’em, buy ’em

Oil and gas stock TransCanada Corp. owns Columbia Pipeline Group, which is paying US$848 million to acquire the master limited partnership Columbia Pipeline Partners LP. TransCanada remains a buy for long-term share price gains and attractive, growing dividends.

On Canada Day, Calgary-based natural gas pipeline stock TransCanada Corp. (TSX—TRP) completed the US$13 billion acquisition of U.S.-based Columbia Pipeline Group.

On September 26, TransCanada followed this up by having its new subsidiary offer to acquire master limited partnership, Columbia Pipeline Partners LP. Based on 53,843,466 common units and the offering price of US$15.75, the transaction would cost US$848 million.

TransCanada president and chief executive officer Russ Girling noted the acquisition of Columbia Pipeline Group gives it “an extensive pipeline network linking the continent’s most prolific natural gas supply basins to its most attractive markets.” Environmentalists and aboriginal groups are blocking the construction of new pipelines. As a result, TransCanada is buying into existing pipelines. Since they’re already built, they’re less controversial.

Tap into TransCanada’s dividend growth

Mr. Girling added that the acquisition “supports and may augment an expected eight to ten per cent annual dividend growth rate through 2020.” Companies that pay attractive and growing dividends can assist you to achieve your retirement goals.

This Canadian blue chip stock has also improved its DRIP (or Dividend Re-Investment Plan). You can now reinvest your dividends into new TransCanada shares at a two per cent discount to their market price. This gives you a ‘head-start’ profit. The shares are worth owning.

TransCanada develops and operates North American energy infrastructure including natural gas and liquids pipelines, power generation and gas storage facilities. Its network of natural gas pipelines stretches more than 90,300 kilometres. They reach “virtually all major gas supply basins in North America.”

In addition, the company has developed and operates one of North America’s largest liquids pipeline systems. Its 4,300 kilometres links “growing continental oil supplies to key markets and refineries”.

As a large independent power producer, TransCanada owns or has interests in more than 10,500 megawatts of power generation in Canada and the U.S. It also considers itself “the continent’s leading provider of gas storage and related services”. The company can now store 664 billion cubic feet. That’s particularly important in a time of lower energy prices.

This blue chip stock remains a buy for long-term share price gains as well as attractive and growing dividends.

 

The Investment Reporter, MPL Communications Inc.
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