Canada’s energy stocks lagged in 2023 because of falling oil prices. But as of this writing, the sector is out of negative territory and up 5.5% year to date versus the broader market’s 2.2% gain. Some market analysts believe traditional oil and natural gas companies remain attractive investment opportunities.
One top name well-positioned for a breakout is TC Energy Corporation (TSX:TRP). Whether you’re an income or growth investor, this $55.7 billion energy infrastructure company and pipeline operator is a must-own large-cap stock now. Its President and CEO, François Poirier, assures that TC Energy is preparing to unlock and deliver superior shareholder value.
Strategic spinoff
On July 27, 2023, the Board of Directors approved the plan to spinoff TC Energy’s liquids pipelines business. Management believes that separating the business and forming two independent, investment-grade companies would maximize the value of the assets.
The decision came after a two-year strategic review, and the spinoff should be complete in the back half of 2024. South Bow is the name of the new standalone oil infrastructure company, while TC Energy will operate as a low-risk natural gas and energy solutions company.
Record financial results
In 2023, TC Energy’s net income soared 341.3% year over year to $2.8 billion. In Q4 2023, net income reached $1.46 billion compared to the $1.44 billion net loss in Q4 2022. The net cash provided by operations last year rose 14% to $7.27 billion versus 2022.
“By remaining focused on a clearly defined set of priorities emphasizing project execution, safety and operational excellence, we delivered record operational performance and financial results,” said Poirier. He adds that 2023 marks one of the most transformational years for TC Energy. Besides the impending spinoff, the Coastal GasLink pipeline project is complete and has started delivering natural gas.
Poirier notes the reliability, availability, and exceptional performance of the assets. The natural gas pipeline business has zero exposure to material volumetric or commodity price risks. At the same time, the utilization rates are high due to strong demand, particularly in the Keystone Pipeline System.
Dividend aristocrat status
Because of the strong operational and financial performance, the Board of Directors approved a 3.2% dividend hike for the quarter ending March 31, 2024. According to Poirier, the latest dividend increase represents 24 consecutive years of dividend growth.
If you invest today, TRP trades at $53.70 per share (+3.75% year to date) and pays a 7.15% dividend. Assuming you purchase 100 shares, your investment will generate $95.99 every quarter.
Favourable growth outlook
“As we look to 2024, our strategic priorities remain in pursuit of maximizing the value of our assets, safely executing our major projects on time and budget and further enhancing our balance sheet strength and flexibility,” said Poirier.
TC Energy plans to limit annual capital expenditures between $6 billion and $7 billion. The priorities in 2024 are to advance the Southeast Gateway pipeline project and U.S. Natural Gas Pipelines projects. Moreover, the company commits to developing quality projects within its secured capital program. Around $7 billion of assets will be in service this year.
Profitable options
TC Energy and South Bow will pursue independent strategies and advance opportunities aimed at unlocking value for decades ahead. You can elect to stay invested in TC Energy, move to South Bow for the pipelines business or invest in both.
