TAC - TransAlta: Preferreds Offer Lucrative Yields Common Shares Show Promise

2024-05-31 12:03:37 ET

Summary

• TransAlta Corporation is an attractive investment option for investors seeking value and predictable cash flows in the current market environment.
• The company's strong dividend history, shares buyback program, and ownership of power-generating assets make it an appealing choice for investors.
• The expected interest rate cuts are setting common and preferred shares of TransAlta Corporation for a strong performance over the next 6 to 12 months.
• My DCF analysis indicates a 28% upside for (TAC) and (TA:CA)based on growing long-term power prices and the successful implementation ofnew development projects and M&As.
• Series B preferreds with floating dividends (TSX:TA.PR.E:CA) currently provide a 10.2% yield. I also like the company’sSeries G preferreds with fixed dividends (TSX:TA.PR.J:CA) that will have their dividend rate recalculated on Monday, September 2.

Investment case for TransAlta's common and preferred shares

After the outstanding performance of growth companies at the beginning of the year, investors seem increasingly interested in moving towards value and predictable cash flows. This is supported by expectations that upcoming interest rate cuts in Canada and the US would make cash investments less competitive. Lower interest rates are likely to result in the reallocation of funds towards stable, dividend-paying businesses like utilities, which have been under pressure for the last three years.

TransAlta Corporation ( TA:CA ) ( TAC ) seems to fit the bill well. The company has been paying dividends since 1990 and has a shares buyback program. It owns and operates 5.7GW of power-generating assets in Canada, the US and Australia. Renewable generation represents a significant part of the company’s portfolio and development pipeline....

For further details see: