As the TSX Composite Index continues to make new highs, it’s easy to feel like everything is getting too expensive. But I’ve found one fundamentally strong stock that not only feels fairly valued but also pays a dividend yield of 7.4%.
In this article, I’ll highlight this Canadian dividend stock that I believe is worth accumulating right now.
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A high-yield dividend stock to buy with reliable cash flow
The stock I have in mind is South Bow (TSX: SOBO), a newly spun-off energy infrastructure firm that owns and operates one of the most critical crude oil pipeline systems in North America. At the time of writing, SOBO stock is trading at $37.68 per share with 11% year-to-date gains, giving it a market cap of $7.8 billion. It currently offers a strong annualized dividend yield of 7.4%, paid quarterly.
The company’s core assets include the Keystone Pipeline System, which connects Canadian oil supply to key refining hubs in the U.S. Midwest and Gulf Coast. In the third quarter of 2025, South Bow recorded a solid average throughput of 584,000 barrels per day on the main Keystone line, with the U.S. Gulf Coast segment delivering an even higher 703,000 barrels per day.
That stable operational performance has helped keep the company’s cash flow on track, despite pressure from tight pricing differentials and lower profits from its marketing segment. As a result, South Bow still delivered $254 million in normalized EBITDA (earnings before interest, taxes, depreciation, and amortization) during the quarter — up 2% sequentially.
Solid numbers and a stronger outlook for 2026
This strong financial footing has made South Bow’s dividend more than just sustainable. In the third quarter alone, the company declared $104 million in dividends, or $0.50 per share. With 90% of its EBITDA backed by long-term contracts and most customers being investment-grade refiners and producers, there’s plenty of visibility into its future cash flows.
In the latest quarter, South Bow’s net profit came in at $93 million, while distributable cash flow jumped to $236 million, driven partly by its focus on tax optimization efforts and stable operations.
Looking ahead, the company expects to generate US$1 billion in normalized EBITDA in 2026, with around 90% of that secured under firm contracts. Similarly, its distributable cash flow is projected at US$655 million for next year, even as it ramps up new growth projects.
Long-term growth backed by real infrastructure
One reason I’m buying this stock in bulk is the clarity in its long-term growth roadmap. South Bow is already benefiting from its first major expansion with the Blackrod Connection Project, which was mechanically completed and partially placed into service in the third quarter. This 25-km lateral pipeline is expected to boost the company’s cash flows through the second half of 2026 and into 2027.
Meanwhile, South Bow is also navigating its recent spin-off from TC Energy with discipline, having successfully exited most of its transitional service agreements and modernized its SCADA (supervisory control and data acquisition) system. On top of that, it plans to maintain a stable dividend while gradually lowering its net debt-to-EBITDA ratio from the current 4.6 times to around 4 times over the medium term.
In short, South Bow is balancing income and future growth exceptionally well — a rare combo in today’s market. Also, its payout is backed by contracted revenue, its operations are dependable, and its long-term capital strategy is clearly aligned with shareholder value. Given these solid fundamentals, I wouldn’t hesitate to keep adding South Bow to my portfolio as a long-term hold.
