TC Energy just spun off its oil pipeline business to focus on natural gas and electrical power. The new company is our #1 Spinoff Buy for 2024 as it promised dividend stability and to continue its 24-year payout growth streak.

In fact, the company is projected 3% – 5% annual dividend growth as it streamlines its debt load and focuses on premium infrastructure assets.

The stock trades at 17.3 times the company’s forward earnings forecast.

TC ENERGY CORP. (Toronto symbol TRP; www.tcenergy.com) generates steady cash flow for investors mainly through a 93,300-kilometre pipeline network that pumps natural gas from Alberta to eastern Canada and the U.S. Its other operations include 4,900 kilometres of crude oil pipelines and seven power plants.

TC completed the spinoff of its oil pipeline business as separate company South Bow Corp. on October 1, 2024. Investors received 0.2 of a South Bow share for every TC share they hold. The new shares trade on the Toronto and New York exchanges under the “SOBO” symbol. Investors will not be liable for capital gains taxes until they sell their new shares.

The spinoff will let TC better focus on its natural gas and power businesses. The renewed concentration will help the company profit from the rising export of liquefied natural gas (LNG) to Asia and other overseas markets. Moreover, U.S. power producers continue to convert their coal-fired plants to burn natural gas.

As well, new datacentres that specialize in artificial intelligence applications and the shift to electric-powered vehicles will spur long-term demand for electricity.

In April 2024, TC raised your quarterly dividend by 3.2%, to $0.96 a share from $0.93. The new annual rate of $3.84 yields a high 5.9%. The company promises that the combined dividend of the two firms (roughly 86% from TC and 14% from South Bow) will be no less than TC’s annual dividend rate just prior to the split.

Dividend Stocks: Payout increases on the way to keep a 24-year record intact

After the split, the new South Bow company plans to increase its dividend by 2% to 3% annually. The former parent company also aims to raise its annual dividend by 3% to 5%. On November 7, 2024, both firms will declare their dividends for the fourth quarter, payable on January 31, 2025.

TC has raised its dividend rate each year for the past 24 years. In the past five years, the company has increased its dividend at an average rate of 5.1% annually. The TSI Dividend Sustainability Rating for TC Energy is Highest.

In other news, TC has agreed to sell a 5.34% stake in its NGTL System and Foothills Pipeline for $1 billion. These assets gather and pump natural gas from producers in Alberta and B.C. to markets in central Canada and parts of the U.S.

The sale is part of TC’s plan to sell $3 billion of its sell assets to pay down its debt of $49.2 billion. That’s equal to 73% of its $67.2 billion market cap. So far, the company has sold (or agreed to sell) $2.6 billion of assets.

Recommendation in Canadian Wealth Advisor: TC Energy Inc. is a buy. TC Energy is also your #1 Spinoff Buy for 2024.