Canadian energy stock TC Energy (TSX: TRP) has risen 30% in 2024. TC Energy has consistently increased its dividends for over twenty years. Investors buying the stock at its current level can enjoy a dividend yield of 4.8%. Investors who missed the opportunity for the stock’s rebound are wondering whether TC Energy shares are still worth purchasing.
At the time of writing, TC Energy’s trading price is near $68. The stock has experienced significant fluctuations in the past two years, trading close to $74 in June 2022 before a sharp rise in interest rates in Canada and the U.S. led to prolonged weakness in pipeline stocks. Last year, TC Energy’s share price fell to $45 but has since rebounded strongly.
The recovery began last fall when market sentiment shifted from concerns about further rate hikes to expectations of rate cuts in 2024. In recent months, the momentum has further heated up as interest rates in Canada and the U.S. are expected to decrease.
Like its peers, TC Energy uses debt to fund part of its capital plans. Pipeline projects can cost billions of dollars and sometimes take years to build. An example is TC Energy’s 670-kilometer Coastal GasLink project, which was approved in 2018 with an initial budget of around $6.6 billion. The project has faced multiple delays and is finally expected to complete mechanical work by the end of 2023, with a final cost of approximately $14.5 billion.
TC Energy had to take on additional debt to bring the project to the finish line. This is another reason why the stock was under pressure in 2022 and 2023. The Coastal GasLink and another large pipeline project, Southeast Gateway, are expected to commence commercial operations in 2025. The revenue from these new assets, along with anticipated cash flows from ongoing projects, should support dividend growth in the coming years.
If the Trump administration continues to impose tariffs on most goods entering the U.S., inflation in the United States could rebound next year. If interest rate cuts in Canada and the U.S. stall or rates rise, TC Energy and other pipeline stocks may face some new headwinds.
Is TC Energy stock worth buying today? Short-term volatility is to be expected. That said, the dividends paid by TC Energy are quite attractive and should continue to grow. Any significant pullback presents an opportunity to add to this stock.
