Income-seeking Canadian investors can consider increasing exposure to quality TSX dividend-growth stocks to benefit from a widening yield at cost. As just a handful of dividend stocks are solid long-term investments, it’s essential to identify companies that generate cash flows across business cycles, have a sustainable dividend-payout ratio, and consistently expand profit margins.
One such TSX dividend stock is TC Energy (TSX:TRP), which currently offers a yield of 5.7%.
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Is TC Energy stock a good buy?
TC Energy, valued at a market cap of $71.7 billion, is an energy infrastructure company in North America. It owns and operates a network of over 93,000 kilometres of natural gas pipelines, which transport natural gas from supply basins to distribution companies, power-generation plants, industrial facilities, and export terminals.
With a working gas capacity of 535 billion cubic feet, TC Energy also has regulated natural gas storage facilities. Moreover, it had a liquids pipeline system spanning 4,900 km that connects crude oil supplies from Alberta to refining markets in the United States. This business was spun off last month, allowing TC Energy to focus on its core operations.
Notably, TC Energy owns or has interests in seven power-generating facilities with a combined capacity of 4,300 megawatts, which are powered by natural gas and nuclear fuel.
This diversification lowers TC Energy’s overall risk profile. Additionally, a majority of TC’s cash flow is tied to inflation-linked long-term contracts, making it immune to fluctuations in commodity prices. Due to this diversification and a low-risk business profile, TC Energy has raised its dividends from $0.8 per share in 2000 to $3.84 per share in 2024.
A strong performance in Q3 of 2024
In the third quarter (Q3) of 2024, TC Energy increased comparable EBITDA (earnings before interest, tax, depreciation, and amortization) by 6.1% year over year. It aims to end 2024 at the upper end of its EBITDA guidance, which has driven share prices higher over the last 12 months.
TC Energy expects to invest between $7.4 billion and $7.7 billion towards capital expenditures this year, which should be accretive to future cash flow and earnings.
The TSX energy giant emphasized that it has lowered the cost estimate of its Southeast Gateway pipeline by 11% to between $3.9 billion and $4.1 billion. Further, the big-ticket project will be commercially in service within the next 12 months.
TC Energy completed asset divestitures totalling $1.6 billion in the first nine months of 2024, which includes its Portland Natural Gas Transmission System for pre-tax proceeds of $1.1 billion.
Priced at 18.8 times forward earnings, TC Energy stock has returned over 500% to shareholders in the past 20 years after adjusting for dividend reinvestments.
The Foolish takeaway
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| TC Energy | $69.05 | 145 | $0.96 | $139.2 | Quarterly |
A $10,000 investment in TC Energy will help you purchase 145 company shares. Given its annual dividend of $3.84 per share, these 145 shares will help you earn $556.8 in yearly dividends. If TC Energy raises dividends by 7% annually, the payout will double to over $1,100 over the next 10 years. In the near term, TC Energy expects to increase its dividends between 3% and 5% each year, supported by growth in its cash flow per share.
