TC Energy (TRP.TO)

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. 
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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.

ENB has lots of debt, which the company has indicated it's going to reduce, which means slower dividend growth over time. Yield is 7.6%.

FTS is less levered. For a pure income play, he'd choose this one over ENB.

His favourite play in the entire sector is TRP. Less levered than ENB. Healthy dividend yield, with more room for growth. More room for growth in general. 

Believes prospects for business are bright. Oligopoly with hard to replicate assets. However, lots of Capex with debt levels sensitive to interest rates. Expect steady dividend yield. Long term off-take agreements good for steady revenue stream. "Toll booth" style business good for defensive investors. If interest rates fall, also good for business. 

Buy at current levels. Good exposure to growth in natural gas demand, with natural gas egress in western Canada. Company split will probably eventually be well received -- the asset is fully contracted for 2 decades, predictable cashflows. Discount to peers. Yield is 7%, solid.

TRP plans to spin off its liquids division, TC Energy Liquid Corp., South Bow. Under the proposed spinoff, TC Energy shareholders will retain their current ownership in TC Energy's common shares and receive a pro-rata allocation of common shares in the new Liquids Pipelines Company, South Bow. The spin off will be tax free to Canadians. Full details are still not available, but we believe it is the right move for the company. Dividends (total) will stay the same and should continue to grow at both companies. We would, for now, suggest keeping both, unless and until new information becomes available. There is still plenty of time here before the split closes. 
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Coastal GasLink on schedule and on budget, set to deliver gas by end of fiscal 2023. This should be a de-risking event for them. Pretty cheap at 11x 2024. Asset sales should help de-risk. Really good dividend, good price, OK catalysts. Not a lot of growth. Will work at these levels, with interest rates coming down. His pecking order is ALA, ENB, and then TRP.

Pipeline business has been under extreme pressure in Canada, and should be performing better. Assets are very valuable as hard to replicated. Energy sector still has opportunity. Demand for oil will remain for the next decade. 

His large-cap, Canadian energy exposure. Good valuation, yield is higher than ENB.

Investor Day highlighted plans to separate business into natural gas and pipelines. Discount valuation to peers. Identity crisis. If you own, sit tight. Good assets, value will be unlocked, paid to wait. If you don't own it, buy ENB instead.