To The Moon

$TC Energy(TRP)$

Introduction

In this article I will dive deep into TC Energy, ticker symbol TRP, a top North American energy infrastructure company. Known for its stable dividend payments and growth potential, TC Energy is a strong contender for any dividend-focused portfolio.

We’ll explore what the company does, review its latest earnings, and assess its future prospects. Finally, I’ll share my personal perspective on whether TC Energy might be a good addition to your investments.

What is TC Energy?

TC Energy is a leading North American energy infrastructure company specializing in the transportation, storage, and generation of energy. The company operates an extensive pipeline network, including the Keystone Pipeline, which transports crude oil and natural gas across Canada and the United States.

In addition to its pipeline operations, TC Energy owns power generation assets, including natural gas and renewable energy plants. The company’s regulated businesses generate stable, long-term cash flows, making it a consistent dividend payer. With ongoing investments in energy infrastructure, TC Energy is well-positioned for continued growth.

Earnings Overview

In its latest earnings report, TC Energy announced a 6% year-over-year increase in comparable EBITDA, reaching $2.79 billion. Comparable earnings also rose by 4%, driven by strong operational performance across its various segments.

The company’s natural gas pipeline operations in the US, Canada, and Mexico all reported higher comparable EBITDA. Its Power and Energy Solutions segment posted an impressive 27% increase compared to the same quarter last year. Additionally, TC Energy achieved 95% operational reliability in its Keystone system and successfully completed a spin-off transaction to streamline its operations further.

Growing Dividends

When we examine TC Energy's dividend growth, we can see a long history of consistent increases. As the company continues to grow its cash flow per share, it enables TC Energy to expand its dividend payouts while maintaining a healthy payout ratio. The dividend has been steadily rising for the past 24 years, making TC Energy one of the most reliable dividend payers in its sector.

Capital Expenditure

The company also demonstrates strong discipline when it comes to capital spending. They have reduced their projected net capital expenditures for 2024 by approximately 8%, largely due to the successful execution of the Southeast Gateway project. For 2025, TC Energy remains committed to a net capital expenditure target of $6 billion to $7 billion, reflecting its ongoing focus on capital efficiency and cost management.

Market Outlook

Looking ahead, TC Energy is well-positioned to meet future energy needs. The demand for natural gas and electricity is expected to rise significantly over the next decade. With the projected growth in North American natural gas demand and the global shift toward electrification, TC Energy's extensive infrastructure—comprising its natural gas pipelines and power generation assets—will play a crucial role in addressing this growing demand.

Fundamental Analysis

TC Energy's business mix is heavily concentrated, with 90% of its 2025 comparable EBITDA coming from natural gas pipelines and 7% from Bruce Power. Compared to its midstream peers, TC Energy has a higher exposure to natural gas, positioning the company well in line with long-term energy trends. As natural gas consumption continues to rise and the global shift toward electrification accelerates, TC Energy’s cash flows are expected to increase significantly. This, in turn, will reduce the company’s portfolio risk and help it stand out in the sector, enabling it to meet the growing energy demand.

Growth Pipeline

To meet this rising demand, TC Energy is making substantial investments to expand its production capacity. The company has allocated $28 billion to natural gas pipelines and $4 billion to Power and Energy Solutions. These investments include enhancing LNG connectivity across North America and Mexico, where demand is projected to grow by 26 billion cubic feet of LNG per day by 2035. Additionally, TC Energy is focusing on increasing its power generation capacity, driven by the electrification of industries, coal retirements, and growing demand for AI and data centers. Key initiatives also involve improving LDC energy reliability, expanding supply access, and modernizing infrastructure to support increasing energy needs. Furthermore, the company is developing 700 megawatts of nuclear power generation capacity, further strengthening its position for long-term growth.

Revenue Growth

Looking ahead, TC Energy projects annual growth in comparable EBITDA of 5% to 7% through 2027 and a 4% to 5% increase in adjusted funds from operations. Beyond 2027, TC Energy is targeting a higher-end annual growth rate of 3% to 5% for its dividends per share. This sustainable growth is largely supported by the company’s strong foundation in rate regulation and long-term contracts, ensuring a reliable cash flow for future expansion and dividend increases.

Capital Efficiency

TC Energy is focused on improving its capital efficiency and has adopted a disciplined approach to spending. The company has already identified and realized around $2.5 billion in cost savings for the 2024-2027 period. These efforts are expected to drive consistent comparable growth in earnings. As TC Energy improves its cash flows and earnings in the future, it will be able to continue deleveraging organically, bringing its debt ratio to much lower levels. Their target debt-to-EBITDA ratio of 4.75x is both prudent and achievable, particularly given their disciplined spending strategy. The company’s increasing cash flows will support this process, allowing TC Energy to reduce leverage while still investing in future projects.

Debt Ratio

With its improving cash flows and earnings, TC Energy is on track to reduce its debt levels and reach its target debt-to-EBITDA ratio of 4.75x. This conservative goal is realistic, thanks to the company’s disciplined spending and the strong cash flow that supports the ongoing reduction of leverage.

Stock Performance

TC Energy has shown a solid growth trajectory over the past year, with the stock price up by nearly 19%, currently trading at around $47 per share. The market capitalization stands at $49.3 billion, with the stock priced at about 14 times earnings, reflecting its strong performance.

Dividend

Looking at the dividend information from Seeking Alpha, TC Energy offers an attractive dividend yield of 5.72%, significantly higher than the sector average of 3.13%. This indicates that the company generates enough cash flow to sustain its dividend payments, making TC Energy an appealing option for dividend-focused investors.

Price Target

Seeking Alpha's 12-month price target for TC Energy is around $50, representing a potential upside of approximately 5.3% from its current price. The highest price target is $56, while the lowest is $40, suggesting that analysts are optimistic about the company’s future performance. The majority of analysts rate the stock as a "Moderate Buy."

Conclusion

In conclusion, I believe TC Energy is a strong candidate for investors seeking a stable dividend income with solid growth prospects. Its disciplined approach to capital spending, consistent earnings growth, and attractive dividend yield make it an appealing option for long-term investors.

TC Energy represents a strong long-term investment opportunity. The company has strategically positioned itself to benefit from the growing energy demand in North America, with a solid growth pipeline and numerous projects in development. Operating in the midstream sector, where cash flows are stable and predictable, provides the company with added financial stability.

With a 24-year track record of consistent and growing dividends, TC Energy demonstrates its commitment to delivering substantial returns to shareholders. Personally, I’m bullish on the stock due to its attractive dividend yield of over 5.7%, well above the sector average. The company’s positioning to meet the increasing energy demand, particularly driven by AI, data centers, and electrification, further enhances its growth potential. This ensures TC Energy’s strong market position and relevance for the long term.

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