TC Energy (TRP.TO)

Tremendous network of pipelines, wonderful barrier to entry. Also 7 nuclear, gas, and power plants. Higher costs on Coastal GasLink created a buying opportunity. Spinning off lower-growth oil business to trim debt and focus on faster-growing nat gas unit. High returns, balance sheet stronger than some peers and improving, high yield of close to 8%. Attractive valuation. Likes it.

For more information, see the goodreid.com blog for his Globe and Mail article.

A dividend play, now paying nearly 8%. A retiree can buy now and collect income for years to come. TC is spinning off the liquids part of the business, so TC will remain a pure gas play. Their debt is exposed to high interest rates, but the term of their debt is a decade long. If they continue to sell assets and focus on gas, TC will do well.

Debt-driven business, so interest rates hurt. Dividend yield of 7% is quite safe. Owns great assets, not easily replaced. Future growth will be in the US. Own it here and do well. He owns ENB.

They've delivered poor guidance and returns, but you can collect the dividend. Demand for natural gas could help. The balance sheet isn't great.

He owns a little but prefers others for exposure to pipelines and infrastructure. It has a little too much debt and a higher payout ratio. It would be 4th or 5th on his list of stocks in this field.

Its dividend is 7%. It is not usually that high which means the stock is oversold. It is putting out more positive news in the past little while and insiders have bought $8 million worth of stock over the past year. A lot of analysts have Hold positions and should start to move away from this. It beat earnings estimates by 20% and raised guidance. It is at the low end of its trading range. If interest rates come down then the price could rise.    Buy 9  Hold 12  Sell 2

The question was on his preference re Canadian Natural Resources or TC Energy. TRP has a lot of debt and it's hard to build a pipeline. CNQ has driven down debt. It will sit at a lower level of around $10 billion and return excess money to shareholders.

Good business with strong assets. Splitting pipeline assets into separate company. Natural gas and nuclear energy business strong. Excellent management team. Dividend yield ~7%. Expecting growth in dividend yield. Coastal Gas Link good for business. Best pipeline business in Canada. 

Interest-sensitive pipelines have all had a rough time. He owns ENB. 

These companies have great assets that aren't going away. CEOs of these companies feel it's difficult to do business in Canada. ENB, for example, is dedicating all its capital to the US. That's going to be the strategy if these companies want to grow. 

Good time to buy. Though rates aren't going down as quickly as people think, they're not going up from here. That's the value proposition. Over the next 6-9 months or so, rates will come down at the short end and the yield curve will look differently. These companies will benefit from that.

The dividend yield is elevated. Stock has more upside. It's a bond proxy if you hold this long term. A good, long-term story.

Impressive that the stock's done nothing for a year, yet you still get a great dividend return. Assets are very difficult to replicate, long-term competitive advantage. Shares under pressure from macro and company-specific events. Trades 12x earnings, looking at possible interest rate drops later this year. Yield close to 7.5%.

He's bullish energy, but there are better names in this space, like Pembina and Altagas. TRP's resistance is at $76 back in mid-2022. The chart shows a sharp downward trend.

TRP EPS was $1.35, much better than estimates of $1.09. Revenue of $4.23B was slightly below estimates. EBITDA of $3.1B was 10% better. It was a good quarter and the dividend was raised 3%. TC Energy's strongest quarterly Ebitda growth this year may be in 1Q, possibly expanding by mid-single digits. Canadian Natural Gas Pipelines Ebitda will likely be driven by higher NGTL rate-base earnings, helped by expansions, while Liquids Pipelines Ebitda growth could be robust amid easy comparisons after the oil spill limited Keystone volume in 1Q23. Power and Energy Solutions may be restricted due partly to Bruce Power Unit 1 maintenance. TC Energy still seeks C$3 billion in additional asset sales to continue deleveraging. Guidance of C$11.2-C$11.5 billion in 2024 Ebitda was reaffirmed, implying 3.4% growth at the midpoint including the C$200 million 4Q23 Coastal GasLink incentive payment. Capital spending could fall more than 30%, though is still likely to exceed cash flow. After a string of bad news, this was a good result. We might add a bit to an existing position, without getting big. The stock may be on the recovery road here. 
Unlock Premium - Try 5i Free

Trying to maximize value by separating assets, spin off later this year. Inexpensive valuation. Great dividend yield, safe. His preference is ENB.

Its biggest catalyst is falling interest rates, because this is a large dividend payer of 7%.  TRP last fall announced 3-5% annual dividend increases. It trades around 13x PE, among the lowest in the group, and there's a lot of insider buying in the past year.