CA - TC Energy: The Issue With Leverage Makes This A Suboptimal Choice

2024-07-02 15:22:33 ET

Summary

• TC Energy Corporation is a large midstream operator with a market cap of $39 billion and similar operations to most of its peers.
• However, starting from mid-2022, TC Energy Corporation has significantly underperformed the benchmark index.
• Despite this, TC Energy still trades at a relatively rich multiple and offers an average dividend yield.
• In this article, I assess the key fundamentals of TC Energy to see whether there is a solid investment case for investors to consider.

TC Energy Corporation ( TRP ) is one of the largest midstream operators, with a market cap of circa $39 billion. The current structure of TRP's business is rather similar to most of its peers that also operate in the midstream segment. For example, there is a decent distribution of EBITDA generation across natural gas pipeline and storage, liquid pipeline and storage as well as power generation segments. The only notable difference in terms of fundamental aspects of how the TRP business is structured is related to the fact that a notable chunk of TRP's EBITDA stems from Canadian assets. However, the geographical diversification between the U.S. and Canadian markets is not a unique aspect as there are several midstream businesses out there that also have this structure in place (e.g., Enbridge Inc. ( ENB ))....

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