Dividend stocks have continued marching higher over the past year, and while the chart might not be as explosive as the parabolic (or even vertical) movers within the AI scene, I do think that it’s a mistake to overlook the recent strength in the market’s premier dividend growers. In this heated market, dividend yields might be compressing, but, for the most part, there are still fantastic dividend opportunities in a market where most of the names might still be on the underrated side.
Either way, proven performers that are steadily marching higher, perhaps in a more sober fashion than AI stocks this May, or even the ones that experienced an increase in volatility (there are still dips out there, believe it or not) might be where the most intriguing opportunities to swing the bat are today.
In this piece, we’ll look at a dividend stock that continues to pay dividends like clockwork. And with a good amount of past-year share price momentum, perhaps there’s a lot more to like than just the payout as the firm keeps moving down that growth path.
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TC Energy
Enter shares of TC Energy (TSX: TRP), a fantastic natural gas pipeline play that recently hit new all-time highs just over $93 and change per share. The dividend has fallen below 4%, now at 3.8%, but with no shortage of growth projects ahead amid the boom in natural gas demand, I think the name might be worth a larger premium than 27.6 times trailing price-to-earnings (P/E), given the magnitude of earnings growth that could be ahead. In the past year, the stock has been up just shy of 37%. And with the name nearly doubling in the past two years alone, perhaps the most exciting, but still relatively cheap plays on the AI revolution are quietly gaining on the TSX Index.
If the data centre buildout is going to get where it needs to be, the physical (and boring) infrastructure (moving the energy from point A to B) will need to pick up traction as well. Everything from power producers to energy transport plays will need to start putting their foot down a bit harder on the gas to keep up with this new wave of demand, which might be less cyclical and more secular.
For the Canadian energy names, that’s a potentially generational tailwind at a price of admission that some would still consider to be pretty fair. Compared to the red-hot semis, I’d say it’s more of a bargain.
Of course, a strong argument could be made that the AI boom has already made its way to the gas pipeline juggernauts. After all, shares of TRP are definitely on the loftier side of its historical range. But given the AI-driven tailwinds that lie ahead as well as the pipeline of projects (think the LNG Canada phase two expansion), I’d say the current multiple is more than fair.
Arguably, the pipelines are just starting to get respect from investors who are looking for relative value across the AI stack. Between the more obvious winners in the semiconductor layer and the more predictable names with very high earnings visibility hiding in plain sight in the energy layer, I must say I’d rather go for the latter.
TC Energy’s dividend growth streak is going strong, and it might be entering a period where the hikes are that much more generous. Whenever the industry tailwinds are strong and the debt load becomes lighter, investors stand to get spoiled by that much more. TC Energy is already moving fast, but, in my view, there’s room to go even faster as demand stays hot.
