Investing in dividend stocks with a sustainable yield provides you with an opportunity to generate a low-cost passive income stream. One such TSX stock that offers a high dividend yield is South Bow (TSX:SOBO).
Valued at a market cap of $8 billion, South Bow is an energy infrastructure company. South Bow operates a strategic liquids pipeline network spanning approximately 4,900 kilometres, connecting western Canadian crude oil supplies to major U.S. refining markets in the Midwest and Gulf Coast.
The company’s flagship asset, the Keystone Pipeline System, safely transports crude oil to meet daily North American energy demand. South Bow maintains strategically positioned storage terminals in key locations, including Hardisty, Alberta; Cushing, Oklahoma; and Houston, Texas.
The company offers investors a sustainable quarterly dividend of US$0.50 per share, yielding at an attractive rate and supported by a resilient business model that generates stable, low-risk cash flows.
South Bow maintains an investment-grade debt capital structure and has successfully de-risked its deleveraging profile. Management remains committed to meeting current North American energy needs while advancing its liquids pipeline infrastructure to accommodate future demand.
Is this TSX dividend stock a good buy?
Earlier this month, South Bow laid out an ambitious growth strategy to triple its enterprise value from US$10 billion to US$30 billion over the next three to five years.
The pipeline operator, which spun out from TC Energy in October 2024, operates a robust liquids pipeline system connecting western Canadian crude oil supplies to major U.S. refining markets in the Midwest and Gulf Coast.
The company delivered strong results in its first year as an independent entity. It achieved every milestone it committed to, which includes completing the Blackrod project on time and on budget.
Management also resolved long-standing litigation with customers and accelerated its deleveraging timeline by nine to twelve months, now targeting a debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio of four times by late 2027, rather than 2028.
CEO Bevin Wirzba emphasized TC Energy’s unique strategic position as the only market-based pipeline system offering batched transport with the fastest transit times from Alberta to the Gulf Coast.
This irreplaceable corridor serves a growing heavy oil supply from the Western Canadian Sedimentary Basin, which holds 160 billion barrels of reserves and produces 5.5 million barrels daily.
Management estimates the basin could add another one million barrels per day of production over the next decade, with the first 500,000 barrels coming from optimizations that require minimal capital investment.
South Bow plans to pursue both organic and inorganic growth opportunities while maintaining its investment-grade credit rating and capital allocation priorities.
What next for SOBO stock?
For 2026, South Bow guided to a normalized EBITDA of US$1 billion and distributable cash flow of US$655 million. The company maintains its sustainable quarterly dividend of US$0.50 per share, yielding 7%.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| South Bow | US$27.40 | 255 | US$0.50 | US$127.5 | Quarterly |
Given its outstanding share count, South Bow’s annual dividend expense is around US$415 million, indicating a sustainable payout ratio of 64%.
A $7,000 investment in South Bow stock will help you generate $510 in annual dividends. Combined with projected EBITDA growth of 2% to 3%, South Bow offers a compelling double-digit total return proposition for investors seeking exposure to North American energy infrastructure.
