Investors looking to add some safety to their portfolio amid the recent market weakness may want to consider TransCanada Corp. (TRP).

The company pays a dividend that yields a strong 3.9%, and estimates have been moving higher since it reported solid Q1 results in late April. It is a Zacks #1 Rank (Strong Buy) stock.

Company Description

TransCanada Corp. is an energy company focused on natural gas transmission and power services. It currently transports around one-fifth of all natural gas production in North America.

It is headquartered in Calgary, Alberta, Canada and has a market cap of $30.4 billion.

First Quarter Results

TransCanada reported first quarter earnings per share of 63 cents, in-line with the Zacks Consensus Estimate. It was a 27% increase over the same quarter last year.

Revenue for the quarter came in hotter than expected at $2.363 billion, beating the Zacks Consensus Estimate of $2.206 billion. It was a 15% increase year-over-year.

Comparable earnings before interest, taxes, depreciation and amortization (EBITDA) rose 22% to $1.225 billion in the quarter. The Energy segment reported a 37% jump in EBITDA to $354 million. The Natural Gas Pipelines segment reported EBITDA of $796 million, a 4% increase year-over-year.

Outlook

Analysts raised their estimates for both 2011 and 2012 off the strong quarter. Despite a few weak economic reports lately, estimates have not come down at all.

The 2011 Zacks Consensus Estimate is currently $2.38, representing 23% growth over 2010 estimates. The 2012 consensus estimate is 9% higher at $2.59.

It is a Zacks #1 Rank (Strong Buy) stock.

Fundamentals

TransCanada generates strong cash flow and has been returning value to shareholders with increasing dividends. Funds from operation rose 27% year-over-year to $919 million, for instance.

The company pays out the majority of its income through dividends. It currently yields a solid 3.90%.

The valuation picture looks very reasonable for TRP as well. Shares trade at 18.3x forward earnings, a discount to the industry average of 20.1x. Its price to book ratio is an attractive 1.8, well below the industry multiple of 2.2.

Conclusion

TransCanada offers investors a safe haven among the choppy markets with a solid dividend and reasonable valuation. With earnings estimates moving higher, now could be a great time to get in.

Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.

 
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