TC Energy (TSX:TRP) has been one of the major players in the North American energy sector for more than seven decades. In 2024, TRP stock has seen a solid rise, with shares gaining 31.4% year-to-date, reaching $61.93, and pushing its market cap to $64.4 billion. But what has really caught investors’ attention recently is the spinoff of its liquids pipelines business, South Bow, completed at the start of October. This strategic move, which took two years of careful planning, aims to sharpen TC Energy’s focus on its core strengths.
In this article, we’ll take a closer look at TC Energy’s recent changes and find out whether its stock is still a good buy for long-term investors.
A strategic shift for TC Energy: The South Bow spinoff
The recent spinoff of South Bow marks a fundamental shift for TC Energy. By spinning off its liquids pipelines business, TC Energy can now focus more intently on its core strengths – natural gas infrastructure and power solutions. The company expects this spinoff to streamline its operations in a better way to meet the growing demand for secure and sustainable energy in North America.
With a leaner structure, TC Energy expects to capture more opportunities in natural gas transportation and power generation by adopting tailored strategies. At the same time, South Bow can pursue growth in the liquids transportation market as a separate entity.
TC Energy’s strong financial base
Over the years, TC Energy’s focus on natural gas and power has really been the backbone of its financial strength. Despite continued volatility in the prices for energy products due to macroeconomic uncertainties and geopolitical tensions, the company’s growth story continued in 2023.
Last year, its total revenue rose 16.5% YoY (year-over-year) to $15.9 billion, mainly due to robust demand across its natural gas pipelines and power generation divisions. During the year, TC Energy hit a record comparable EBITDA of $11 billion, up 11% YoY, as it pushed forward big projects like the Coastal GasLink pipeline.
Now, with the Liquids Pipelines business spinning off, TC Energy is expected to double down on its core strengths, which could help it keep a tight grip on its investments while growing its natural gas footprint.
Is TC Energy stock a good buy now?
The South Bow spinoff isn’t just a split – it could be seen as a chance for shareholders to benefit from two companies, each with a clear game plan. While TC Energy is now laser-focused on growing its natural gas and power presence, South Bow has the freedom to chase new opportunities in the liquids market.
This shift for TC Energy is fundamentally about capitalizing on its strengths, which include a regulated and low-risk business model. By concentrating on what it does best, it has the potential to thrive as energy demand keeps growing in the long run.
So, is now the time to buy TC Energy stock? If you’re looking for a reliable energy stock for the long term, TRP’s renewed focus on natural gas could make it the right choice for you. Although the South Bow spinoff may bring some short-term uncertainty, it’s also opening doors for more focused growth in TC Energy’s core areas, making it an excellent stock to buy now and hold for the long term. Also, TRP’s impressive 6.2% annualized dividend yield makes it even more attractive for income-focused investors.
