TC Energy Stock: Buy, Sell, or Hold?

TC Energy is up nearly 30% from the 12-month low. Are more gains on the way?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

TC Energy (TSX:TRP) is up nearly 30% from the 12-month low. Investors who missed the rally are wondering if TRP stock is still undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and total returns.

TC Energy stock

A surge in interest rates in Canada and the United States in 2022 and 2023 triggered a pullback in the share prices of pipeline stocks. These businesses use debt to fund part of their growth program with projects that cost billions of dollars and take years to complete. Higher borrowing costs hurt profits and can reduce the cash that is available for distributions.

Created with Highcharts 11.4.3Tc Energy PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

TC Energy’s share price slid from $74 in June 2022 to less than $44 last year before bargain hunters started to buy the stock in anticipation of cuts to interest rates in 2024. The Bank of Canada has already reduced its rate this year, and the U.S. Federal Reserve is expected to begin cutting rates in the coming months. Inflation appears to be heading to the 2% target, and the central banks want to avoid driving the economy into a recession. As rates fall, more investors will likely move back into high-yield pipeline stocks.

Growth

TC Energy’s share price came under added pressure due to the delays and costs associated with the construction of its Coastal GasLink pipeline. The project received the green light in 2018 but didn’t reach mechanical completion until late last year. The final cost is estimated at $14.5 billion, more than double the original budget. Natural gas is expected to start flowing through the 670 km pipeline in 2025, so the challenges on the project are largely in the rearview mirror.

Management is doing a good job of monetizing non-core assets to raise funds to shore up the balance sheet. With asset sales of $5.3 billion in 2023 and an anticipated $3 billion in 2024, the company should be in good shape to pursue the rest of the growth program. TC Energy is also spinning off the oil pipelines business to unlock value for investors.

The company is targeting capital investments of about $8 billion in 2024 and $6 billion to $7 billion annually over the medium term to drive ongoing growth.

Dividends

As new assets go into service, there should be adequate cash flow growth to support steady dividend increases. TC Energy raised the dividend in each of the past 24 years. An annual increase in the 3-5% range is reasonable to expect over the next few years, supported by the capital program.

Outlook

TC Energy is primarily a natural gas transmission and storage company. Power generation and the oil pipelines round out the assets. Natural gas demand, both domestic and global, is expected to increase in the coming years, partly driven by the surge in power required by artificial intelligence data centres. The fuel is cleaner to burn than oil or coal to produce electricity, and gas-fired power plants will remain key suppliers of reliable power even as the world transitions to renewables.

Should you buy TRP stock now?

The stock isn’t as cheap as it was last fall, but more upside should be on the way. Investors who buy TRP at the current share price can still get a 6.75% dividend yield, so the return is attractive. If you have some cash to put to work in a portfolio focused on high-yield dividends, this stock deserves to be on your radar.

Should you invest $1,000 in Canadian Natural Resources right now?

Before you buy stock in Canadian Natural Resources, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Canadian Natural Resources wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

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.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker has no position in any stock mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Here’s Exactly How a $20,000 TFSA Could Potentially Grow to $200,000

Index funds like the iShares S&P/TSX Capped Composite Index (TSX:XIC) are tax free in a TFSA.

Read more »

Dividend Stocks

How I’d Invest $6,000 in Canadian Real Estate Stocks to Build Lasting Wealth

Canadian REITs on sale! See how grocery-anchored retail properties offering 9% yields could turn $6,000 into lasting wealth despite US…

Read more »

rain rolls off a protective umbrella in a rainstorm
Dividend Stocks

Economic Headwinds: Should You Still Consider Buying the Dip?

A market dip might seem like a bumpy road, but it can be far smoother in the future with the…

Read more »

e-commerce shopping getting a package
Dividend Stocks

Consumer Spending Plays Amidst the Current Market Dip

Consumption may go down in market dips, but certain consumer stocks are certainly better off than others.

Read more »

Asset Management
Dividend Stocks

12% Dividend Yield! I’m Buying This TSX Stock and Holding for Decades

Stocks with high-dividend yields carry risks. But they could be a good long-term investment. Here is a 12% dividend stock…

Read more »

Canadian flag
Dividend Stocks

How I’d Build a Foundation of Canadian Value Stocks in My Investment Strategy

Canadian investors can explore iShares Canadian Value Index ETF for value stock ideas to build a foundation for their diversified…

Read more »

Canadian dollars are printed
Dividend Stocks

How I’d Transform a $30,000 TFSA Into a Cash-Flow Machine

Here's why TFSA investors should consider owning dividend stocks such as Mullen Group in 2025.

Read more »

A woman shops in a grocery store while pushing a stroller with a child
Dividend Stocks

Dip Buyers Could Win Big in Today’s Market Dip

If you want to buy the dip, think long-term. Which is why this TSX stock is a top option.

Read more »