What Makes TransCanada Corporation (TSE:TRP) A Great Dividend Stock?

TransCanada Corporation (TSX:TRP) is a true Dividend Rock Star. Its yield of 4.73% makes it one of the market's top dividend payer. In the past ten years, TransCanada has also grown its dividend from 1.44 to 2.76. Below, I have outlined more attractive dividend aspects for TransCanada for income investors who may be interested in new dividend stocks for their portfolio. View our latest analysis for TransCanada

What Is A Dividend Rock Star?

It is a stock that pays a reliable and steady dividend over the past decade, at a rate that is competitive relative to the other dividend-paying companies on the market. More specifically:

It is paying an annual yield above 75% of dividend payers

It consistently pays out dividend without missing a payment or significantly cutting payout

Its dividend per share amount has increased over the past

It can afford to pay the current rate of dividends from its earnings

It is able to continue to payout at the current rate in the future

High Yield And Dependable

TransCanada's yield sits at 4.73%, which is high for Oil and Gas stocks. But the real reason TransCanada stands out is because it has a proven track record of continuously paying out this level of dividends, from earnings, to shareholders and can be expected to continue paying in the future. This is a highly desirable trait for a stock holding if you're investor who wants a robust cash inflow from your portfolio over a long period of time.

If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. TRP has increased its DPS from CA$1.44 to CA$2.76 in the past 10 years. It has also been paying out dividend consistently during this time, as you'd expect for a company increasing its dividend levels. This is an impressive feat, which makes TRP a true dividend rockstar. The current trailing twelve-month payout ratio for the stock is 72.74%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect TRP's payout to increase to 86.94% of its earnings, which leads to a dividend yield of 5.17%. However, EPS is forecasted to fall to CA$3.21 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

Next Steps:

TransCanada ticks all the boxes for what I look for in a dividend stock. If you are looking to build an income focused portfolio, this could be one to include. However, given this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three pertinent aspects you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for TRP’s future growth? Take a look at our free research report of analyst consensus for TRP’s outlook.
2. Valuation: What is TRP worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether TRP is currently mispriced by the market.
3. Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.