For the 17th consecutive year, TransCanada Corporation (TSX:TRP)(NYSE:TRP) shareholders will be getting an annual raise.
This dividend increase is one of the biggest in recent memory. The quarterly payout was hiked 10.6%, increasing from $0.565 per share to $0.625 per share. Or to put it another way, the payout went from $2.26 per share to $2.50.
TransCanada shares currently yield 4.02%.
TransCanada has delivered dividend growth rates historically of approximately 7%. Management is currently in the middle of a big expansion push -- buoyed by the recent acquisition of Columbia Pipeline Group and U.S. President Trump giving the green light to the once-squashed Keystone XL pipeline project, among others -- which is slated to increase earnings by 8-10% annually through 2020.
Management plans to reward shareholders as they push forward, promising to increase the dividend between 8% and 10% annually between today and 2020. Most stocks yielding 4% or higher can’t offer that kind of potential dividend growth.
The company just posted full-year 2016 results. Excluding special items, the bottom line was encouraging. Adjusted earnings came in at $2.78 per share for the year, versus $2.48 per share in 2015, an increase of nearly 11%. Net cash from operations flirted with $7.00 per share.
Those earnings give TransCanada a payout ratio of 90% when looking at trailing earnings, but that number drops to 81.7% if we assume adjusted earnings grow 10% in 2017. And as the old saying goes, the safest dividend is the one that’s just been raised.
