TAC - TC Energy Floating Preferred Shares: Double-Digit Yield With Relatively Low Risk

2024-04-15 06:53:25 ET

Summary

• TC Energy Series 2 preferred shares and TransAlta Preferred Shares, Series B offer outstanding dividend yields of 10.4% and 10.8%, respectively.
• Floating dividend preferred shares are likely to provide better yields than fixed dividend shares over the next two years.
• Switching from floating to fixed dividend preferred shares after two years should not result in a significantly lower capital appreciation.
• In addition to an outstanding dividend yield, the valuations of TRP.PR.F:CA, TNCAF, and TA.PR.E:CA are anticipated to improve with the Bank of Canada's projected interest rate cuts later this year.
• TC Energy is a low-risk investment opportunity with potential above-average long-run returns.

Investment case

The post-COVID spike in inflation, followed by the Bank of Canada's ((BOC)) massive increase in interest rates, resulted in an outstanding dividend yield for TC Energy Series 2 preferred shares ( TRP.PR.F:CA ) ( TNCAF ) and TransAlta preferred shares, Series B ( TA.PR.E:CA ). Currently, the annual yield for these floating dividend preferred shares is 10.4% for TRP.PR.F:CA and 10.8% for TA.PR.E:CA. Combined with the relatively low-risk profile of their respective companies, this is a rare-to-find investment opportunity....

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