Summary
- TC Energy Corporation is in a 28% bear market due to several short and medium-term challenges.
- TC Energy just raised the dividend for the 23rd consecutive year and plans on raising it by 3% to 5% annually for the foreseeable future.
- The company's balance sheet will likely be stressed in 2023, but management has the plan to deleverage while investing in growth and dividend hikes.
- TC Energy's utility-like business, good energy transition plan, and 84th percentile S&P risk management score indicate the 6.7% dividend remains very safe.
- TC Energy Corporation is 14% undervalued, offering a 27% upside to fair value, and analysts expect about 10% long-term returns from this energy utility. Management is guiding for 12.7% to 14.7% long-term returns, consistent with its 35-year historical returns.
A version of this video article was published on Dividend Kings on Tuesday, February 28, 2023.
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2023 is proving to be a very challenging year. Hopes of rapidly falling inflation, a potential Fed pivot by year's end, and a soft landing have not worked out.
The economy remains overheated and the Fed's "Super Core" inflation remains stuck at 4% to 5%.
In fact, for three consecutive months, super core inflation has been rising, not falling.
Core PCE, the Fed's official inflation metric, was also up 0.6% month-over-month in January, an annualized rate of 7.4%.
All this means that, for now, we have a "no landing" scenario. But the Fed is going to have to deal with inflation, and there are just two ways it can do that.
- reverse money printing ($1.1 trillion per year)
- raising interest rates to the highest levels in over 20 years.
The bond market now thinks there is nearly a 50% chance the Fed will hike four more times to 5.5% before it pauses and waits for inflation to fall steadily.
Unfortunately, the Cleveland Fed's real-time inflation model estimates that next month's inflation will be the same as this month's.
The longer inflation remains elevated, the greater the risk of a wage-price spiral that keeps inflation permanently stuck at 4% to 5%.
That's not something the Fed can tolerate (nor can the U.S. government's borrowing costs).
Which is why the 2023 recession everyone was expecting is still likely coming, just possibly not until 2024.
And that brings me to today's update on TC Energy Corporation ( TRP ), a 6.7% yielding global aristocrat that is suffering a 28% bear market right now.
Let me show you why TRP's temporary setbacks don't threaten that attractive and steadily growing yield and this is a potential retirement dream stock for your diversified income portfolio.
Why Wall Street Is Bearish On TC Energy Right Now
TRP is actually up 2% YTD, but as you can see, it's in a new bear market relative to its post-invasion highs.
Several DK members have asked me to look into the causes of this new bear market and whether or not the investment thesis remains intact.
Why is TRP down 28% off its recent highs? A few key reasons.
- energy prices have fallen nearly 50% since peaking post-invasion
- a small oil spill from Keystone
- a major cost overrun at its CoastLink pipeline.
Let's address these challenges in order.
The decline in oil prices is NOT a major risk to TC's dividend safety, which remains very safe.
TC Energy Dividend Safety
Rating | Dividend Kings Safety Score (250 Point Safety Model) | Approximate Dividend Cut Risk (Average Recession) | Approximate Dividend Cut Risk In Pandemic Level Recession |
1 - unsafe | 0% to 20% | over 4% | 16+% |
2- below average | 21% to 40% | over 2% | 8% to 16% |
3 - average | 41% to 60% | 2% | 4% to 8% |
4 - safe | 61% to 80% | 1% | 2% to 4% |
5- very safe | 81% to 100% | 0.5% | 1% to 2% |
TRP | 87% | 0.5% | 1.65% |
Risk Rating | Very Low Risk (84th S&P Global percentile risk-management) | BBB+ Negative credit rating = 5% 30-year bankruptcy risk | 20% or less max risk cap |
Long-Term Dependability
Company | DK Long-Term Dependability Score | Interpretation | Points |
Non-Dependable Companies | 20% or below | Poor Dependability | 1 |
Low Dependability Companies | 21% to 39% | Below-Average Dependability | 2 |
S&P 500/Industry Average | 40% to 59% | Average Dependability | 3 |
Above-Average | 60% to 79% | Dependable | 4 |
Very Good | 80% or higher | Very Dependable | 5 |
TRP | 86% | Very Dependable | 5 |
Overall Quality
TRP | Final Score | Rating |
Safety | 87% | 5/5 very safe |
Business Model | 70% | 3/3 wide moat |
Dependability | 86% | 5/5 very dependable |
Total | 81% | 13/13 Ultra SWAN global aristocrat |
Risk Rating | 5/5 Very Low Risk | |
20% OR LESS Max Risk Cap Rec | 5% Margin of Safety For A Potentially Good Buy |
Dividend Kings Safe Midstream List
TRP's 81% overall quality makes it a low-end 13/13 Ultra SWAN global aristocrat.
Why? Because TC Energy's payout ratio was 50% a year ago, the lowest in the industry, providing it with a strong safety buffer in case something went wrong (which it has).
TC Payout Ratio Consensus Forecast (In CAD)
Year | Distributable Cash Flow | Free Cash Flow | Dividend | DCF Payout Ratio | FCF Payout Ratio | Dividend/Share |
2022 | $7,247.0 | -$1,683.24 | $3,585.60 | 49.5% | -213.0% | $3.60 |
2023 | $7,716.0 | $2,848.56 | $3,695.16 | 47.9% | 129.7% | $3.71 |
2024 | $8,482.0 | $4,442.16 | $3,804.72 | 44.9% | 85.7% | $3.82 |
2025 | $9,828.0 | $2,729.04 | $3,904.32 | 39.7% | 143.1% | $3.92 |
2026 | $11,032.0 | $3,894.36 | $3,914.28 | 35.5% | 100.5% | $3.93 |
2027 | $11,638.0 | $4,472.04 | $4,332.60 | 37.2% | 96.9% | $4.35 |
2028 | $12,599.0 | $5,398.32 | $4,551.72 | 36.1% | 84.3% | $4.57 |
Annual Growth | 9.7% | 13.6% | 4.1% | -5.1% | -8.3% | 4.06% |
(Source: FactSet Research Terminal.)
TC Energy is equity self-funding and is on its way to becoming free cash flow self-funding.
- zero reliance on new equity issuances to grow its business
- on its way to being independent of both equity and debt markets to grow its business.
An 83% discounted cash flow ("DCF") payout ratio is considered safe for this industry, and TRP's 48% payout ratio is the lowest of any midstream blue-chip.
By 2027, even with aggressive growth spending, it's expected to be generating sufficient free cash flow to pay the 4% growing dividend and cover all growth spending.
- At which point its debt levels could begin falling over time.
With a 23-year dividend growth streak that analysts expect to reach 29 years by 2028, the risk to TRP's dividend is minimal, even in a severe recession.
We are reaffirming our 2023 financial outlook with comparable EBITDA expected to be 5% to 7% higher than in 2022, and we've increased our dividend for the 23rd consecutive year. We are advancing our $5-plus billion asset divestiture program that will provide funding for our portfolio of high-quality growth opportunities while, at the same time, accelerating our deleveraging...
We don't see a scenario where we will need to change our dividend policy. We expect to continue to grow the dividend in that 3% to 5% range. I'll remind everyone that, that is subject -- that, that is a Board decision.
But in terms of what management would be recommending, we don't foresee any need to make any changes to our long-term dividend growth range even after giving effect to the divestiture program." - CEO, Q4 conference call (emphasis added).
Management's plans to grow the dividend at 4%, slightly slower than cash flow (5% to 7% guidance), are designed to reduce the payout ratio over time and allow TRP to become fully FCF self-funding.
- it's already equity self-funding and has been since 2016.
A Minor Oil Spill Exemplifies The Importance of Risk Management At The Corporate Level:
TC Energy also reported a first look at its Keystone pipeline spill (the Milepost 14 incident) from December 2022. The firm has recovered 90% of the 12,937 barrels spilled. ...
TC Energy has accrued an expected liability of CAD 650 million in environmental liabilities and an asset of CAD 650 million in insurance recoveries, essentially zeroing out the expected liabilities...
Still, insurance should be able to cover virtually all costs, except potential fines , in our view, keeping the impact on TC Energy shareholders to a minimum ." - Morningstar (emphasis added).
A 13,000-barrel spill at mile 14 of the Keystone pipeline is expected to result in $479 million in cleanup costs, estimates that are likely to increase but which are covered by insurance.
The Canadian government will likely fine TRP, but this isn't a major threat to the dividend or the investment thesis.
Coastal GasLink Overruns: The Biggest Issue Facing TC Energy
TRP is still tied for the highest credit rating in the industry, though the cost overruns for GasLink have resulted in Moody's, Fitch, and S&P downgrading their outlooks to negative.
- a 33% chance of a downgrade in the next two years.
Rating Agency | Credit Rating | 30-Year Default/Bankruptcy Risk | Chance of Losing 100% Of Your Investment 1 In |
S&P | BBB+ Negative Outlook | 5.00% | 20.0 |
Fitch | A- Negative Outlook | 2.50% | 40.0 |
Moody's | Baa2 (BBB Equivalent) Negative Outlook | 7.50% | 13.3 |
DBRS | A- Stable | 2.50% | 40.0 |
Consensus | BBB+ Negative Outlook | 4.4% | 22.9 |
(Sources: S&P, Fitch, Moody's, DBRS.)
TC Energy Corp. recently announced an updated cost estimate for its Coastal GasLink project. The increase of approximately C$3.3 billion will bring the project's estimated total cost to C$14.5 billion . The increased project cost, to be realized over the remainder of construction, is in addition to the C$9.5 billion in 2023 capital expenditure the company announced in November 2022...
We believe that the asset sales will be the foundation for the company to achieve its capex plan, fund the additional costs of Coastal GasLink, and bridge receipt of the cash to be received for the cleanup of the Keystone Pipeline System spill. TC has indicated none of its assets are off limits, and we believe its significant portfolio would be attractive to purchasers. " - S&P (emphasis added).
As it completes its largest growth project, TC will have to manage its leverage ratios in the next two years carefully.
Based on our base-case assumption, we forecast debt to EBITDA of about 5.4x in 2023 and 5x in 2024." - S&P
Rating agencies consider 5.0X or less net debt/EBITDA safe for midstream, and TRP's leverage might exceed that slightly this year due to its $10.7 billion in growth spending in 2023. Here is the FactSet consensus for absolute leverage.
- 7.3X in 2023
- 5.7X in 2024
- 5.1X in 2025
- 4.7X in 2026.
Rating agencies are using their estimates for cash flow and leverage ratios and for the next few years, TRP's outlook will likely remain negative.
The Coastal GasLink project is perhaps even ahead of pace to meet its end-of-2023 target for mechanical completion, preventing further overrun costs of up to CAD 1.2 billion. Despite the progress, the incremental several billion dollars in earlier costs meant the firm had to take a CAD 2.6 billion after-tax impairment charge for the quarter." - Morningstar (emphasis added).
The good news is that management expects to be done with this project this year, preventing further cost overruns, though it did have to take a one-time impairment of $1.9 billion in the most recent quarter.
So what does all this mean for TRP's 6.7% yielding dividend growth thesis?
Why TC Energy's Investment Thesis Remains Intact
Founded in 1951 in Calgary, TRP is one of the oldest midstream companies in North America.
TRP has the largest growth backlog in midstream at $25 billion through 2028.
That's to grow the largest midstream asset base in North America.
An asset base with 95% of cash flow regulated or under long-term contract is the 2nd most utility-like in the industry.
- ENB is 98% of cash flow under contract or regulated.
TRP owns over 60,000 miles of oil and gas pipelines and 4.2 GW of electric capacity.
It transports 25% of North America's oil and gas.
What about the energy transition?
According to IHS Markit, by 2050, oil will still provide 31% of the world's energy, down from 38% in 2022.
Natural gas is expected to go from 33% to 36%, and renewables will provide 19%, up from 5%.
This is a decades-long transition that TRP is already investing in through solar, wind, carbon sequestration, and renewable natural gas.
- methane from landfills.
Natural gas bridges a green energy future, providing the best base-load power after nuclear.
- Nuclear is the best choice but for political reasons is expected to decline as a % of global energy generation.
Gas is expected to continue to replace coal over the coming decades, with a cumulative 225 GW of coal being shut down by 2050 in North America.
- the equivalent of 169 million homes worth of power
- there are about 200 million homes in North America
- by 2050 natural gas will have replaced 85% of coal for power generation.
Global oil demand is expected to peak around 2030 at 110 million barrels per day, but even by 2050 is expected to remain at around 100 million bpd (today's levels).
- due to demand from emerging markets like China, India, and Africa.
Electricity demand in North America is expected to accelerate to around 1.3% annual growth rates driven mostly by renewables, which TRP has invested in for years.
Hydrogen production is expected to grow 2X to 5X by 2050 and carbon sequestration by 14X to 39X. TRP is investing in both.
TRP is investing in 14 kinds of projects totaling $25 billion through 2028, and long term thinks it can keep investing at a $3.7 billion annual rate.
TRP only invests in projects it expects to generate 7% to 9% annual returns.
- Current borrowing costs are 2.34%
- 85% of debt is fixed rate
- average maturity 20 years.
The bond market is so confident in TRP's energy transition plans that it's willing to lend millions in bonds maturing in 2081.
- The "smart money" on Wall Street is betting millions that TRP will still be around in 60 years...at least.
After ENB paid off its 2,112 bonds early, TRP has the longest duration bonds in the industry.
Management is confident it can use asset sales to keep its self-funding growth plans intact while growing the dividend at 3% to 5% per year and deleveraging.
- 4.8X debt/EBITDA expected by 2026, agreeing with the analyst consensus.
TRP's utility-like business is so stable that its cash flows were stable even when oil fell to -$38 in April 2020, the worst oil crash in human history.
Through 2026 TRP plans to:
- complete its $25 billion growth backlog
- deleverage to 4.8X debt/EBITDA
- grow cash flow by 6% annually
- grow the dividend at 3% to 5% annually
- grow energy/renewables to 10% to 15% of its cash flow.
How dependable is TRP's dividend? Thanks to its utility-like business model very dependable.
No matter what the economy or oil prices are doing, TRP keeps raising its dividend every year for the last 23 years.
- through 4 recessions
- two economic crises
- three oil crashes
- interest rates as high as 6%.
TRP's business is 95% regulated or based on long-term contracts, including take-or-pay ones in which energy companies pay for reserving capacity on their pipelines.
- If oil companies shut down their operations entirely, they would still legally have to pay TRP in full.
The regulated price hikes on pipeline pricing are indexed to inflation, and inflation protection is built into long-term contracts.
- TRP's assets are natural inflation hedges.
Management sees a clear path to 6% cash flow growth through at least 2026.
Long-term TRP plans to maintain safe leverage of 4.8X while growing the dividend at a utility-like rate and being able to fund $3.7 to $4.4 billion of growth per year.
Bottom Line: TRP's Long-Term Thesis Has Weakened Just A Bit But Remains Intact
Growth Outlook: Potentially Slow And Steady Utility-Like Growth For Decades To Come
What is the effect of the GasLink cost overruns and Keystone spill?
Short-Term Consensus
Metric | 2022 Growth Consensus | 2023 Growth Consensus | 2024 Growth Consensus | 2025 Growth Consensus |
Sales | 2% | 4% | 3% | 3% |
Dividend | 11% | 3% | 3% | 3% (26-year streak) |
Operating Cash Flow | 22% | -19% | 0% | -5% |
Distributable Cash Flow | 18% | -8% | 5% | 10% |
EBITDA | -7% | 24% | 2% | 7% |
EBIT (operating income) | -8% | 31% | 0% | 2% |
(Source: FactSet Research, FAST Graphs.)
Cash flow growth is expected to be lumpy for the next few years, while the dividend is expected to grow at the low end of management's guidance.
What about the long term?
Twenty-two analysts have a median long-term growth consensus of 3.2%, below management's 6% long-term guidance.
Outside of a reasonable margin of error, TRP hasn't missed estimates in over a decade.
Smoothing for outliers, its historical analyst margins-of-error is 5% to the downside and 10% to the upside.
- 3% to 6% growth consensus range, including management guidance.
FAST Graphs, FactSet Research FAST Graphs, FactSet Research FAST Graphs, FactSet Research
TRP's historical growth rates over the last 20 years have been 2% to 7% and its $25 billion growth backlog and massive growth potential in a $7 trillion North American green energy transition market mean it could likely grow 3% to 6% for decades to come.
Consensus Total Return Potential
Investment Strategy | Yield | LT Consensus Growth | LT Consensus Total Return Potential | Long-Term Risk-Adjusted Expected Return |
TC Energy (Analyst Consensus) | 6.7% | 3.2% | 9.9% | 6.9% |
TC Energy (Management Guidance) | 6.7% | 6.0% | 12.7% | 8.9% |
ZEUS Income Growth (My family hedge fund) | 4.2% | 10.4% | 14.6% | 10.2% |
REITs | 3.9% | 6.1% | 10.0% | 7.0% |
Schwab US Dividend Equity ETF | 3.6% | 9.4% | 13.0% | 9.1% |
Vanguard Dividend Appreciation ETF | 2.2% | 10.0% | 12.2% | 8.5% |
60/40 Retirement Portfolio | 2.1% | 5.1% | 7.2% | 5.0% |
Dividend Aristocrats | 1.9% | 8.5% | 10.4% | 7.3% |
S&P 500 | 1.7% | 8.5% | 10.2% | 7.1% |
Nasdaq | 0.8% | 10.9% | 11.7% | 8.2% |
(Sources: DK Research Terminal, FactSet, Morningstar.)
Whether TRP grows at 3% or 6%, the return potential for a defensive global aristocrat is pretty appealing.
Rolling Returns Since 1988
TRP has historically slightly outperformed the S&P 500 while delivering far superior income and income growth.
11.2% Annual Income Growth For 33 Years
Dividends in USD (Portfolio Visualizer Premium )
For context, the S&P has delivered 8% annual income growth since 1989, and TRP has beaten that by 3% annually, resulting in a 2022 yield on cost of 210%.
Valuation: A Wonderful Company At An Attractive Price
FAST Graphs, FactSet FAST Graphs, FactSet FAST Graphs, FactSet
For the last 20 years, hundreds of millions of income investors have paid 7.5X to 8.5X cash flow for TRP outside of bear markets and bubbles.
- 91% probability that this range includes intrinsic value.
Metric | Historical Fair Value Multiples (19-Years) | 2022 | 2023 | 2024 | 2025 | 12-Month Forward Fair Value |
5-Year Average Yield (Industry Bear Market) | 5.29% | $51.04 | $51.80 | $51.80 | $54.63 | |
Operating Cash Flow | 8.18 | $56.85 | $43.76 | $43.76 | $41.31 | |
Average | $53.79 | $47.44 | $47.44 | $47.05 | $47.44 | |
Current Price | $40.65 | |||||
Discount To Fair Value | 24.43% | 14.32% | 14.32% | 13.59% | 14.32% | |
Upside To Fair Value (Including Dividends) | 32.32% | 16.71% | 16.71% | 15.73% | 23.45% | |
2023 OCF | 2024 OCF | 2023 Weighted OCF | 2024 Weighted OCF | 12-Month Forward OCF | 12-Month Average Fair Value Forward P/OCF | Current Forward P/OCF |
$5.35 | $5.35 | $4.42 | $0.93 | $5.35 | 8.9 | 7.6 |
Including TRP's bear market average dividend yield, I estimate TRP is worth about 9X cash flow, and today it trades at 7.6X, offering about 23% upside to fair value.
Analyst Median 12-Month Price Target | Morningstar Fair Value Estimate |
$44.53 (8.3X cash flow) | $47.00 (8.8X cash flow) |
Discount To Price Target (Not A Fair Value Estimate) | Discount To Fair Value |
8.71% | 13.51% |
Upside To Price Target (Not Including Dividend) | Upside To Fair Value (Not Including Dividend) |
9.54% | 15.62% |
12-Month Median Total Return Price (Including Dividend) | Fair Value + 12-Month Dividend |
$47.27 | $49.74 |
Discount To Total Price Target (Not A Fair Value Estimate) | Discount To Fair Value + 12-Month Dividend |
14.00% | 18.28% |
Upside To Price Target ( Including Dividend) | Upside To Fair Value + Dividend |
16.29% | 22.36% |
Analysts expect TRP to trade at 8.3X in 12 months, and Morningstar's discounted cash flow model estimates its worth 8.8X, almost identical to mine.
Rating | Margin Of Safety For Very Low-Risk 13/13 Ultra SWAN Quality Companies | 2023 Fair Value Price | 2024 Fair Value Price | 12-Month Forward Fair Value |
Potentially Reasonable Buy | 0% | $47.44 | $47.44 | $47.44 |
Potentially Good Buy | 5% | $45.07 | $45.07 | $45.07 |
Potentially Strong Buy | 15% | $40.33 | $40.33 | $40.33 |
Potentially Very Strong Buy | 25% | $33.80 | $35.58 | $35.58 |
Potentially Ultra-Value Buy | 35% | $30.84 | $30.84 | $30.84 |
Currently | $40.65 | 14.32% | 14.32% | 14.32% |
Upside To Fair Value (Including Dividends) | 23.45% | 23.45% | 23.45% |
For anyone comfortable with its risk profile, TRP is a potentially good buy, verging on a potentially strong buy.
Risk Profile: Why TC Energy Isn't Right For Everyone
There are no risk-free companies, and no company is right for everyone. You have to be comfortable with the fundamental risk profile.
S&P Environmental Risk Summary
Environmental factors are a moderately negative consideration in our credit rating analysis of TC . The diversified energy company is one of the largest providers of transportation and storage of crude oil and natural gas and power generation in North America and will face longer-term volume risks related to reduced drilling activity and demand due to the transition to renewable energy sources. We expect the company to increase spending on low-carbon and renewable energy assets such as recent solar power conversion for pumps and compressors along its various pipeline routes and investments in renewable energy as it seeks to leverage its expertise in the power generation business. Given the opposition to large-scale pipeline projects, including Keystone XL and Coastal Gas Link, we view social factors as having a moderately negative influence. While TC's approach to these infrastructure projects significantly mitigated the company's financial risk, we expect ongoing community opposition to new organic industry projects will continue. " - S&P (emphasis added).
TC Energy's Risk Profile Includes
- political/regulator risk (Keystone cost it $15 billion , which its suing the U.S. government to recoup)
- litigation risk (endless lawsuits from environmentalists)
- project execution risk
- industrial accident risk (up to $1 billion to clean up a spill)
- counter-party risk (it has a lot of customers, and not all are investment grade)
- disruption risk (renewable energy transition)
- M&A execution risk (industry consolidation is expected at some point)
- talent retention risk (tightest job market in over 50 years)
- currency risk (modest, but almost 60% of revenue is not in CAD)
- dividend currency risk (mean-reverting over time but does cause some dividend fluctuations in the short term).
How do we quantify, monitor, and track such a complex risk profile? By doing what big institutions do.
Long-Term Risk Management Analysis: How Large Institutions Measure Total Risk Management
DK uses S&P Global's global long-term risk-management ratings for our risk rating.
- S&P has spent over 20 years perfecting their risk model
- which is based on over 30 major risk categories, over 130 subcategories, and 1,000 individual metrics
- 50% of metrics are industry specific
- this risk rating has been included in every credit rating for decades.
The DK risk rating is based on the global percentile of a company's risk management compared to 8,000 S&P-rated companies covering 90% of the world's market cap.
TRP Scores 84th Percentile On Global Long-Term Risk Management
S&P's risk management scores factor in things like:
- supply chain management
- crisis management
- cyber-security
- privacy protection
- efficiency
- R&D efficiency
- innovation management
- labor relations
- talent retention
- worker training/skills improvement
- occupational health & safety
- customer relationship management
- business ethics
- climate strategy adaptation
- sustainable agricultural practices
- corporate governance
- brand management.
TRP's Long-Term Risk Management Is The 114th Best Risk Manager In The Master List (77th Percentile In The Master List)
Classification | S&P LT Risk-Management Global Percentile | Risk-Management Interpretation | Risk-Management Rating |
BTI, ILMN, SIEGY, SPGI, WM, CI, CSCO, WMB, SAP, CL | 100 | Exceptional (Top 80 companies in the world) | Very Low Risk |
Strong ESG Stocks | 86 | Very Good | Very Low Risk |
TC Energy | 84 | Very Good | Very Low Risk |
Foreign Dividend Stocks | 77 | Good, Bordering On Very Good | Low Risk |
Ultra SWANs | 74 | Good | Low Risk |
Dividend Aristocrats | 67 | Above-Average (Bordering On Good) | Low Risk |
Low Volatility Stocks | 65 | Above-Average | Low Risk |
Master List average | 61 | Above-Average | Low Risk |
Dividend Kings | 60 | Above-Average | Low Risk |
Hyper-Growth stocks | 59 | Average, Bordering On Above-Average | Medium Risk |
Dividend Champions | 55 | Average | Medium Risk |
Monthly Dividend Stocks | 41 | Average | Medium Risk |
(Source: DK Research Terminal.)
TRP's risk-management consensus is in the top 23% of the world's best blue-chips, on par with the likes of:
- Lowe's ( LOW ): Ultra SWAN dividend king
- 3M ( MMM ): Super SWAN dividend king
- BlackRock ( BLK ): Ultra SWAN
- Royal Bank of Canada ( RY ): Ultra SWAN
- Northrop Grumman ( NOC ): Ultra SWAN.
The bottom line is that all companies have risks, and TRP is very good at managing theirs, according to S&P.
How We Monitor TRP's Risk Profile
- 22 analysts
- four credit rating agencies
- 26 experts who collectively know this business better than anyone other than management
- and the bond market for real-time fundamental risk-assessment
When the facts change, I change my mind. What do you do, sir?" - John Maynard Keynes
There are no sacred cows at iREIT or Dividend Kings. Wherever the fundamentals lead, we always follow. That's the essence of disciplined financial science, the math behind retiring rich and staying rich in retirement.
Bottom Line: Despite Setbacks, This 6.7%-Yielding Global Aristocrat Is Likely A Great Long-Term Investment
Dividend Kings Automated Investment Decision Tool
TC Energy Fundamentals Summary
- The largest midstream asset base in North America
- 23-year dividend growth streak (expected to reach 29 years by 2028)
- very safe 6.7% yield (growing at 3% to 5% for the foreseeable future)
- 9.9% to 12.7% long-term return potential Vs. 10.2% S&P
- historically 14% undervalued
- 7.6X cash flow
- 50% consensus return potential over the next five years, about equal to that of the S&P 500
- 4X the consensus income potential of the S&P 500 over the next five years.
TRP has hit a rough patch regarding a small oil spill that might cost a few hundred million dollars when all is said and done.
The cost overruns at CoastLink are a bigger issue, pressuring the TRP balance sheet in 2023. But management is confident it can deleverage back to target by 2026 while completing its $25 billion growth backlog and growing the dividend at 3% to 5% annually.
While the decrease in the growth outlook is disappointing, management still believes it can grow at 6% annually, potentially far beyond 2026.
- $7 trillion infrastructure growth opportunity through 2030 alone gives TRP a long growth runway.
With the bond market confident that TC Energy Corporation's long-term energy transition plan will work and that TRP will keep growing for the next 60 years at least, I remain confident that TRP is a potentially good buy for long-term income growth investors.
For further details see:
TC Energy: A 6.7%-Yielding Global Aristocrat Buy