TC Energy (TSX:TRP) stock entered 2026 with significant momentum. Following the strategic unbundling of its liquids pipelines business into South Bow in late 2024, the company has successfully unlocked a premium valuation for its remaining natural gas and power assets. This move kicked off a streak of industry-leading returns, with TRP generating 17% in total returns over the past year compared to a North American industry average of below 1%.
The question for investors now is simple: Can TC Energy generate double-digit returns again this year?
The outlook for 2026 appears promising. The company is currently executing a three-year investment plan that targets 5% to 7% annual growth in adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) through 2028. For 2026 specifically, management has guided for EBITDA between $11.6 billion and $11.8 billion. This implies impressive sequential operating earnings growth of 6% to 8%, which should provide the liquidity needed to continue strengthening the balance sheet.
Here are the specific factors that will likely drive TC Energy stock’s narrative this year.
Deleveraging: The key to TC Energy stock’s valuation
The primary overhang on TC Energy stock has long been its substantial debt load, which exceeded $59 billion as of September 30, 2025. However, the narrative has shifted from risk to progress.
Management is aggressively targeting a debt-to-EBITDA ratio of 4.75, a significant improvement from the high of 5.4 seen in 2022. Through strict capital discipline and sustained earnings growth, the company is well-positioned to achieve this target in 2026. This balance sheet repair is a critical driver for capital gains right now. With every quarter that TC Energy confirms it is hitting these deleveraging targets, the risk discount on the stock should shrink, allowing the share price to rise.
The nuclear “AI” factor
Beyond natural gas, TC Energy is attracting fresh attention in 2026 due to its nuclear energy exposure. The company owns a 48.4% stake in the Bruce Power partnership, which is fast becoming a crown jewel asset.
As a new wave of artificial intelligence (AI) data centres drives insatiable demand for uninterrupted baseload clean energy, assets like Bruce Power are appreciating in value. The facility recently extended its asset life by 35 years and saw availability increase to 94% during the third quarter of 2025. With power output expected to peak by 2030, this asset is on track to generate substantial free cash flow, providing TC Energy with greater funding flexibility in the years ahead.
Dividend growth and interest rates
Income investors have plenty to watch this quarter. TC Energy stock’s quarterly dividend currently yields a solid 4.5% for 2026. However, management will most likely raise the dividend at the upcoming earnings event in February.
After the South Bow spinoff disturbed its streak of annual increases, the company is keen to re-establish itself as a top-tier dividend-growth stock. A rise of 3% to 5% seems feasible next month, which would push the yield up to approximately 4.7%.
Furthermore, as a utility proxy, TRP stock remains sensitive to North American interest rate policies. With heavy capital expenditures for the Coastal GasLink project now in the rearview mirror, and interest rates potentially stabilizing or declining in 2026, the company’s cost of capital could drop. This would make its quarterly dividend even more attractive relative to risk-free assets.
The Foolish bottom line
Valuation remains the only potential sticking point. At an enterprise-value to free cash flow multiple of 71.8, TC Energy stock looks expensive compared to the industry average of 42.5. However, when you consider the company’s above-average revenue and earnings growth rate, other metrics look reasonable. For instance, the stock trades at a forward price-to-earnings ratio of 19.8, which appears fair given the improving quality of its assets.
Ultimately, TC Energy stock is a midstream leader rising in a bullish natural gas market, with a nuclear kicker adding unique growth potential to its cash flow outlook.
