Investing in quality dividend-growth stocks is a low-cost strategy for beginning a passive-income stream. As dividend payments are not guaranteed and can be suspended if company financials deteriorate, it’s imperative to invest in dividend stocks with stable cash flows and sustainable payout ratios. One such TSX dividend stock is TC Energy (TSX:TRP). Let’s see how you can earn $3,000 in annual passive income by investing in TC Energy.
An overview of TC Energy
TC Energy is a diversified energy infrastructure company valued at $65 billion by market cap. It operates 93,300 kilometres of natural gas pipelines, transporting natural gas from supply basins to local distribution companies, power generation plants, industrial facilities, and LNG export terminals.
TC Energy also has regulated natural gas storage facilities with a total working gas capacity of 535 billion cubic feet. Moreover, it has close to 5,000 kilometers of liquid pipeline systems and has interests in seven power-generation facilities with a combined capacity of 4,300 megawatts.
Since 2000, TC Energy has grown its asset base from $25 billion to more than $100 billion, supporting its consistent dividend hikes. For example, its annual dividend per share has risen from $0.80 to $3.84 in this period, indicating a compound annual growth rate of 6.8%.
TC Energy expects its ongoing capital expenditures to support annual dividend growth of between 3% and 5% in the near term. Given TC Energy’s steady dividend growth, it currently offers shareholders a forward yield of 6%.
The bull case for TC Energy stock
Despite a sluggish and volatile macro environment, TC Energy increased its comparable EBITDA (earnings before interest, tax, depreciation, and amortization) by 10% year over year in the first six months of 2024.
In June, TC Energy shareholders voted to spin off its Liquids Pipelines business, creating two independent investment-grade publicly listed companies. The Liquids Pipelines business will be called South Bow and should unlock additional shareholder value.
TC Energy emphasized that its pipeline business is experiencing rising customer demand, providing it with opportunities to maintain its competitive advantages.
South Bow will be a liquid transportation and storage business. As a standalone entity, it will have greater flexibility to invest in strategic expansion opportunities and unlock the potential of its competitive corridor, which connects WCSB crude oil to the U.S. Midwest and Gulf Coast.
Further, TC Energy will maintain its regulated, low-risk, and utility-like portfolio of natural gas and power businesses.
The company explains, “Focused on long-term energy fundamentals and capital discipline, TC Energy’s established and highly differentiated natural gas and energy solutions portfolio is expected to offer competitive services that meet growing energy demand, generate sustainable cash flow and provide a runway to capitalize on large-scale opportunities as they arise.”
The Foolish takeaway
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| TC Energy | $63.74 | 782 | $0.96 | $750.72 | Quarterly |
Investors need to purchase 782 shares of TC Energy to earn $3,000 in annual dividend income. Your dividend income could double to $6,000 over the next 10 years if TC Energy continues to increase its payout by 7% annually.
At the current price, 782 shares of TC Energy stock would cost you close to $50,000, which is a sizeable investment. However, Canadian investors can further identify other blue-chip dividend stocks and diversify their income portfolio to lower overall risk.
