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Aug.04
8:41 PM ET
Tuesday, 4 Aug 2009
Canada’s Top Pipeline Play

Buy TransCanada, Cramer told viewers on Tuesday. This pipeline play makes money regardless of natural gas’ fluctuating price.

TransCanada [TRP  Loading...      ()   ] is the Mad Money host’s latest “foreign legion” stock pick. He’s pulling together a portfolio of international companies that aren’t being dragged down by a lagging US economy. Given Washington’s seeming predisposition to budget deficits, higher taxes and a weak dollar, investors need to look overseas for profits.

On Monday, Cramer highlighted two Brazilian utilities, CPLF Energia [CPL  Loading...      ()   ] and Cemig [CIG  Loading...      ()   ], for their potential growth and, more importantly, their dividends. TransCanada got the nod today for the same reason. As if the 5% dividend yield weren’t enough, this company also has a key pipeline project coming online in 2010 that is expected to give a very big boost to profits.

TransCanada is the largest natural gas pipeline company in all of North America, and it’s the largest private power company in Canada and the Northeast US. As previously stated, the price of nat gas has no bearing on profits. If it’s pumping through those cross-continental tubes, then TransCanada is making money. That’s one of the reasons Cramer likes Kinder Morgan Energy Partners so much.

That key 2010 project is the Keystone Pipeline, which will pump 1.1 million barrels a day from Alberta to the Texas Gulf Coast. About 83% of its capacity has already been contracted out for an average of 18 years. How’s that for earnings visibility? The expectations for Keystone put a tenfold increase in profits from 2010 to 2013.

Low-cost power generation make sup 30% of TransCanada’s business, and it’s a “pretty well-hedged” business – 75% of its output has been sold forward next year – that “adds some extra stability.” But it’s the Keystone-driven growth that Cramer likes, and that juicy dividend yield that pays investors to wait. That’s why he’s bullish on TRP.

“If you think the United States is headed off the rails,” Cramer said, “I want you to take a trip to the Great White North and join Cramer’s foreign legion with TransCanada.”

Call Cramer: 1-800-743-CNBC

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