TransCanada Corp. (NYSE: TRP) Stock Is a Buy With or Without the Keystone Pipeline

(NYSE: TRP) stockTransCanada Corp. (NYSE: TRP) stock has become synonymous with the Keystone pipeline. That's because it's the most drawn-out controversy in the history of North American oil production.

There's no shortage of news on its environmental and economic effects. FOX News reported that an existing segment of the Keystone pipeline leaked 12 times in 2011. Opponents are concerned about the Keystone XL's route through a crucial Nebraska aquifer. The reserves there supply drinking water to over 2 million people and support the state's agriculture. And the number of jobs it would create remains uncertain, with TransCanada saying 20,000 and the API reporting half a million.

But the Keystone XL is irrelevant when considering whether to buy TRP stock. In fact, TRP stock is poised to gain handsomely in the near future - XL or no XL.

Here's why...

The Keystone Pipeline Is Political Noise

Like most Washington legislation, the Keystone XL pipeline bill became a Congressional battleground. Republicans, who have majorities in the House and Senate, embraced it as a jobs booster. Most Democrats fought to kill it to prevent what they consider severe environmental harm. The bill passed the House 270-152 and the Senate 62-35.

Unfortunately for the GOP, the Senate's tally fell short of the two-thirds majority needed to override a veto. President Obama made good on his promise to veto the bill, which he did on Feb. 24.

"The presidential power to veto legislation is one I take seriously," President Obama said in his veto message to the Senate. "But I also take seriously my responsibility to the American people. And because this act of Congress conflicts with established executive branch procedures and cuts short thorough consideration of issues that could bear on our national interest - including our security, safety, and environment - it has earned my veto."

What many people don't realize is the Keystone isn't the only cross-border pipeline seeking approval. The State Department has approved several other cross-border projects since TransCanada applied for its XL permit in 2009.

(NYSE: TRP) stock
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In fact, Enbridge Energy Partners LP (NYSE: EEP) and Enterprise Product Partners LP (NYSE: EPD) just finished their Seaway pipeline. It's so similar to the Keystone XL that it makes one wonder what all the fuss is about...

The Seaway carries crude from Alberta down to Flanagan, Ill., where it connects to Enbridge's "Line 61" pipeline. "Line 61" transports crude south to Cushing, Okla., and connects to the Flanagan South pipeline. It ends in Freeport, Texas - the main Gulf Coast terminal.

Canadian officials and the two CEOs opened the Freeport leg on Jan. 16. State and local news covered it. But it slipped right past everyone else - especially Congress.

According to a 2013 Congressional Research Service study, the Seaway is one of 46 oil and natural gas pipelines crossing the Canada border. The Keystone XL's proposed 1,179 miles pales in comparison to the 60,911 miles of existing U.S. oil pipelines already operating.

It's clear the Keystone XL debate is a dog-and-pony show. And the possibility of it not being built poses no threat to TransCanada's financial growth.

TRP stock is a strong long-term investment for the following reasons...

Why TransCanada Corp. (NYSE: TRP) Stock Is a Buy

TransCanada is one of the few oil giants to stay profitable in the last year.

Exxon Mobil Corp.'s (NYSE: XOM) most recent earnings report was its worst since 2010. The company saw a 21% decline in Q4 revenues and profits. It earned $6.57 billion on revenue of $87.28 billion. That's a big drop from $8.35 billion in profits on revenue of $110.86 billion earned a year ago.

Exxon isn't alone. BP plc (NYSE ADR: BP) raked in 9.5% less revenue in 2014 than 2013. Chevron Corp.'s (NYSE: CVX) total earnings were 10.3% lower last year than they were in 2013.

TransCanada Corp. (NYSE: TRP)

Recent Price: $41.60

Market Cap: $29.53 billion

Institutional Ownership: 59%

Dividend Yield: 4.02%

EPS: 1.94

Beta: 0.63

Meanwhile, TransCanada has consistently beat earnings expectations. The company posted earnings per share (EPS) of $0.72 last quarter - well above Wall Street's projected $0.62. This marks a 24.1% increase from the year-ago EPS of $0.58. Fourth quarter revenue reached $2.62 billion, beating Wall Street's $2.58 billion projection and Q4 2013's $2.33 billion.

All of that happened while oil prices sank lower and lower. WTI futures plummeted nearly 40% during the last quarter of 2014. Yet TransCanada's management is confident the company will keep growing in the face of price volatility.

"Looking forward, the resiliency of our business model and a strong balance sheet leaves us well positioned to continue to create shareholder value under various market conditions," TransCanada president and CEO Russ Girling said in a press release.

Better still, TRP stock offers reliable dividend growth. The company has raised its annual dividend from $0.80 to $2.08 over the last 15 years. TransCanada expects to increase its dividend by 8% per year through 2017.

According to Yahoo! Finance, analysts have a one-year price target of $60 - a nearly 50% gain from where TRP stock trades today.

The Bottom Line: The Keystone XL's future remains unclear. As politicians continue to bicker over it, keep in mind it will have little impact on either the U.S. pipeline network or TRP stock. TransCanada's strong earnings in spite of low oil prices make TRP stock a valuable growth and dividend play right now.

More on Oil Prices: The replenishment of crude reserves is beginning to take a massive hit. Royal Dutch Shell replaced just 25% of its production in 2014. That's only 300 million barrels to replace 1.2 billion barrels of production. Here's why this massive crunch means higher oil prices...

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