TC Energy (TSX: TRP) is down 15% from the 2026 high. The drop has investors who missed the big rally that occurred over the past two years wondering if TRP stock is now oversold and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividend income and long-term capital upside.
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TRP share price
TC Energy trades near $85 per share at the time of writing, compared to nearly $100 as recently as July. The decline is a meaningful move over a relatively short period of time and has driven the dividend yield back above 4%.
Shifts in the broader financial markets are largely responsible for the recent weakness. TC Energy builds large pipeline and power generation assets that can cost billions of dollars and sometimes take years to complete. To fund the investments, the company uses debt to cover a chunk of the costs. This enables TC Energy to get multiple projects built at the same time, rather than fully funding a smaller number of developments purely from the cash generated by the business.
A combination of variable-rate loans and long-term debt is used by the company. When interest rates increase, the borrowing cost on variable-rate loans jumps immediately. Higher interest rates set by the central banks tend to push up yields in bond markets on longer-term borrowing. This can hit TC Energy when it needs to issue new debt to replace maturing older bonds that were issued at lower interest rates.
In recent weeks, yields on government bonds have soared as investors worry that high oil prices will lead to a spike in inflation and force the U.S. Federal Reserve and the Bank of Canada to raise interest rates. The jump in borrowing costs has put pressure on TC Energy’s share price as investors worry that higher borrowing rates will eat into profits and reduce cash that is available to reduce debt or boost dividends. A big jump in debt costs can also force companies to put some capital projects on hold, which slows down growth.
Opportunity
Natural gas demand is soaring in both North America and overseas. TC Energy has 94,000 km of natural gas pipelines and 650 billion cubic feet of natural gas storage capacity spread out across Canada, the United States, and Mexico. New gas-fired power generation sites are being built to supply power to AI data centres. This will drive up volumes of gas transported along TC Energy’s pipeline networks.
Global demand for North American liquefied natural gas (LNG) is on the rise as countries scramble to secure long-term supplies from reliable regions, after disruptions caused by wars in Ukraine and the Middle East. TC Energy is already planning to double the capacity of its new 670km Coastal GasLink pipeline that carries natural gas from Canadian producers to the LNG Canada export facility on the coast of British Columbia. The company is also in discussion with stakeholders regarding a potential new natural gas pipeline that would carry natural gas from Alberta to Churchill, Manitoba where is would connect with a new LNG export site that would send LNG to Europe via Hudson Bay.
The existing capital program is rolling along at around $6 billion per year.
The bottom line
Interest rate hikes are likely on the way, which could put additional pressure on TC Energy’s share price. The current dividend yield, however, pays you well to ride out the turbulence, and the large growth program should support ongoing dividend increases. As such, further downside should be an opportunity to add to the position.
If you have some cash to put to work in a buy-and-hold dividend portfolio, this stock deserves to be on your radar.
