TC Energy (TSX: TRP) is up more than 25% in the past year. Investors who missed the rally are wondering if TRP stock is still attractive and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on TSX dividend stocks.
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TC Energy share price
TC Energy trades near $66.00 at the time of writing. The stock is down from the recent high above $70 after a run that saw it close in on the $74 the stock reached in 2022 before going into an extended pullback that saw the share price go as low as $45 in 2023.
Interest rates have been a big part of the story in the past three years. TC Energy and other pipeline companies use debt to fund their capital projects that often cost billions of dollars and can take years to complete. Rising borrowing expenses reduce profits and can cut into cash that would otherwise be used to pay dividends or reduce debt. As interest rates spiked in Canada and the United States, investors sold pipeline stocks. The rebound picked up steam as soon as the Bank of Canada and the U.S. Federal Reserve started cutting rates last year.
Project challenges also contributed to weakness in the share price. TC Energy’s 670km Coastal GasLink pipeline is a good example. The pipeline was announced in 2018 and reached mechanical completion in late 2023. Commercial operation began in late 2024. Natural gas deliveries will ramp up this year as soon as LNG Canada, a new liquified natural gas (LNG) export facility in British Columbia, is fully operational. Coastal Gas Link’s final cost is estimated at close to $14.5 billion, which is more than double the initial budget. TC Energy had to take on extra debt to get the project completed.
Opportunity
Coastal GasLink, along with a newly completed pipeline in Mexico, will drive revenue growth in 2025. TC has additional projects on the go with annual capital investments targeted at roughly $6 billion over the medium term. Management did a good job of monetizing non-core assets in the past year to shore up the balance sheet and allow the company to move ahead on the growth program.
Natural gas demand is expected to rise in the coming years as new gas-fired power facilities are built to provide electricity for artificial intelligence data centres. TC Energy’s extensive North American natural gas storage capacity and transmission infrastructure put the company in a good position to benefit from the increase in natural gas demand, both in domestic markets and overseas.
Risks
An extended trade war with elevated tariffs could drive inflation higher in the coming months. This would potentially force the central banks to boost interest rates again, even in a scenario where the economy is weakening. Any upward movement in interest rates would likely put new pressure on TC Energy’s share price.
Time to buy?
Near-term market volatility is expected to continue until the trade battles get sorted out, so I wouldn’t back up the truck.
That being said, TC Energy should hold up relatively well through the turbulence, and you get paid a decent 5% dividend yield at the current share price. Existing shareholders should probably hang on to the position. If you have some cash to put to work, this stock deserves to be on your radar in case it pulls back.
