The TSX has a healthy assortment of dividend stocks across various sectors. A higher concentration is naturally in Financials and Energy, two of the largest segments of the stock market. These sectors also include some of the most trusted and highly valued Dividend Aristocrats in the country, one of which is currently offering quite a generous yield and is a compelling pick for a stock you can hold forever.
A pipeline giant
Canada is home to multiple midstream, even pipeline giants. Still, TC Energy (TSX:TRP) stands out for several reasons, starting with its main pipeline business, which is transporting natural gas. The company is responsible for transporting 30% of the gas consumed in North America. This makes it one of the largest players in the cleaner side of the energy business on the continent.
The natural gas angle is one of the strongest arguments one can make about this company. Natural gas demand is unlikely to decline significantly enough in the coming decades, unlike oil, which has a higher rate of emissions.
TC Energy also has liquids transportation infrastructure, but its modest 4,900-kilometre pipeline for liquids pales in comparison to its massive 93,600-kilometre network of gas pipelines.
The company also has another business, power generation. Its current operating capacity is around 4.6 gigawatts (GW), three-quarters of which is emissionless. This partially offsets the emission profile associated with its main business and gives it some points from an ESG (environmental, social, and governance) investing perspective.
The stock and dividends
TC Energy stock, like a few other midstream stocks in Canada, didn’t get to participate in the powerful bullish phase that propelled many energy companies to great heights. In fact, it’s currently one of Canada’s most heavily discounted large-cap energy stocks, trading 29% lower than its post-pandemic peak.
A consequence of this discount is the dividend yield, which has risen to 7.3%, making it one of the highest-yielding Aristocrats in Canada right now. The valuation has also fallen to a reasonably fair level.
Yield is just one part of the appeal TC’s dividend holds for investors. The stock has a long history of raising its payouts — 22 consecutive years, making it one of the oldest Dividend Aristocrats in the energy sector. The dividend growth is modest, three cents per year for the past three years (making it sustainable as well). An unappealing part is the high payout ratio.
Foolish takeaway
While there are quite a few energy stocks you can hold long term for their dividends, TC Energy is among the handful of stocks from the sector that you might be able to hold virtually forever. The benefits of this long-term holding can be significantly enhanced if you can lock in a generous yield, like the one it’s offering right now.
