1 Oversold Dividend Stock (Yielding 6.8%) to Buy in April 2023

Oversold TSX stocks such as TC Energy offer investors a chance to buy a blue-chip company at a lower valuation and tasty dividend yield.

| More on:
oil and gas pipeline

Image source: Getty Images

The recent decline in oil prices has driven shares of energy companies lower year to date. Several oil and gas companies reported record profits in 2022, allowing them to distribute a significant portion of earnings to investors via dividends.

So, the recent selloff provides investors a chance to buy oversold dividend stocks with tasty yields in April 2023. One such TSX energy stock is TC Energy (TSX:TRP). Down 28% from all-time highs, TC Energy stock currently offers you a dividend yield of 6.8%.

Is TC Energy stock a buy or a sell in 2023?

One of the largest energy infrastructure companies in the world, TC Energy has five business segments. It operates a network of natural gas pipelines spanning 93,700 kilometres, allowing TC Energy to transport natural gas from supply basins to distribution companies, power plants, LNG export terminals, and industrial facilities.

It owns regulated natural gas storage facilities with a working gas capacity of 532 billion cubic feet. Additionally, its liquid pipelines system spans close to 5,000 kilometres connecting Alberta’s crude oil pipelines to refining markets in Illinois and Texas.

TC Energy also owns seven power-generation facilities with a combined capacity of 4,300 megawatts. These facilities are located in Canada and are powered by natural gas and nuclear fuel sources.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCY
TC Energy$54.94182$0.93$169Quarterly

These cash-generating assets allow TC Energy to pay shareholders annual dividends of $3.72 per share, translating to a forward yield of 6.8%. An investment of $10,000 in TRP stock would let investors buy 182 shares of the energy giant, resulting in annual dividends of $677.

These payouts have risen by 6.4% in the last two decades, making TRP among the most popular dividend stocks on the TSX.

What’s next for TRP stock and investors?

An inflationary environment in 2022 allowed TC Energy to increase comparable EBITDA (earnings before interest, tax, depreciation, and amortization) by 6% year over year. This momentum should continue in 2023, as TC Energy has allocated $34 billion towards capital expenditures which should expand its utility-like assets and drive future cash flows higher.

The company expects EBITDA to rise another 6% year over year, allowing it to increase dividends for the 23rd consecutive year in 2023.

TC Energy is also advancing its $5 billion asset-divestiture program. It will sell non-core assets, and the proceeds will be used to strengthen its balance sheet and pursue growth opportunities.

TC Energy explains its assets are rate regulated and underpinned by long-term contracts, providing stability to its cash flows across economic cycles. While it remains part of a cyclical industry, TC Energy has increased dividends amid the financial crisis of 2008, the COVID-19 pandemic, and the ongoing period of rising interest rates.

A key driver of TC Energy’s EBITDA growth was the company’s strong natural gas pipeline business in Canada, Mexico, and the United States.

Since April 2003, TRP stock has returned 152%. After adjusting for dividends, total returns are closer to 500%. Comparatively, the S&P 500 and TSX indices have surged 587% and 458%, respectively, in this period.

Despite its stellar gains, TRP stock is trading at a discount of 10% to consensus price target estimates. After accounting for dividends, total returns are closer to 17%.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Energy Stocks

edit Businessman using calculator next to laptop
Energy Stocks

If You’d Invested $5,000 in Brookfield Renewable Partners Stock in 2023, This Is How Much You Would Have Today

Here's how a $5,000 lump-sum investment in BEP.UN would have worked out from 2023 to present.

Read more »

Pipeline
Energy Stocks

Here Is Why Enbridge Is a No-Brainer Dividend Stock

For investors looking for a no-brainer dividend stock worth holding for the long term, here's why Enbridge (TSX:ENB) should be…

Read more »

Money growing in soil , Business success concept.
Energy Stocks

3 Canadian Energy Stocks Set for a Wave of Rising Dividends

Canadian energy companies are rewarding shareholders as they focus on sustainable financial performance.

Read more »

Solar panels and windmills
Top TSX Stocks

1 High-Yield Dividend Stock You Can Buy and Hold Forever

There are some stocks you can buy and hold forever. Here's one top pick that won't disappoint investors anytime soon.

Read more »

Oil pumps against sunset
Energy Stocks

Is it Too Late to Buy Enbridge Stock?

Besides its juicy and sustainable dividends, Enbridge’s improving long-term growth prospects make it a reliable stock to hold for the…

Read more »

oil and gas pipeline
Energy Stocks

Why TC Energy Stock Is Down 9% in a Month

TC Energy (TSX:TRP) stock has fallen by 9% in the last month, as it continues to divest assets to strengthen…

Read more »

Group of industrial workers in a refinery - oil processing equipment and machinery
Energy Stocks

If You Like Cenovus Energy, Then You’ll Love These High-Yield Oil Stocks

Cenovus Energy is a standout performer in 2024, but two high-yield oil stocks could attract more income-focused investors.

Read more »

Man considering whether to sell or buy
Energy Stocks

Is Enbridge Stock a Buy, Sell, or Hold?

Enbridge now offers a dividend yield near 8%.

Read more »