TC Energy, a prominent North American energy infrastructure company stands out as a strong buy for 2025 due to its strategic restructuring and robust financial outlook. The recent spinoff of its oil pipeline business has delivered a focus on core natural gas infrastructure and power generation operations.
Despite the high debt levels typical for large utilities, this firm’s steady cash flow from extensive pipeline networks and power plants ensures it can cover financing costs while investing in new projects.
With the stock up 23% since the spinoff and trading at a reasonable 18.3 times its projected 2025 earnings, these shares offer a strong long-term income investment—with a 4.8% yield.
TC ENERGY INC. (Toronto symbol TRP; www.tcenergy.com) is a top pick for 2025.
On October 1, 2024, TC completed the spinoff of its oil pipeline business as separate company South Bow Corp. (Toronto symbol SOBO). Investors received 0.2 of a South Bow share for every TC share they held. They will not be liable for capital gains taxes until they sell their new shares.
The remaining company 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. It also owns gas pipelines in Mexico, and owns or invests in seven power plants in Canada and the U.S.
Meanwhile, TC plans to spend $24.9 billion on new projects and upgrades through 2031. Those new projects should lift its EBITDA (earnings before interest, taxes, depreciation and amortization) from $10.0 billion in 2024 to between $11.7 billion and $11.9 billion in 2027.
Those new projects include $800 million U.S. for pipelines that will supply gas to two U.S. power plants that are phasing out their coal-fired generators. TC is also building a $300 million U.S. liquefied natural gas storage project in southeast Virginia that will help local utilities meet higher demand for power during the winter. As well, the company has earmarked $175 million to expand capacity at the Bruce Power nuclear facility in Ontario (TC owns 48.3% of Bruce).
Moreover, potential U.S. tariffs will have little impact on TC. That’s because 97% of its earnings come from rate-regulated or take-or-pay contracts.
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TC Energy: Payout growth streak continues on anticipation of higher cash flow
TC’s shares are up over 23% since the spinoff, as it can now better focus on its natural gas and power businesses. That 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.
Due to the spinoff of the South Bow assets, TC cut your quarterly dividend by 14.3%. Starting with the January 31, 2025, payment, investors began receiving $0.8225 a share instead of $0.96.
Going forward, however, higher cash flow will allow TC to increase the annual dividend rate by between 3% and 5% annually. In fact, the company has already increased its quarterly dividend—it will rise 3.3% to $0.85 a share with the April 2025 payment. This increase marks TC Energy’s twenty-fifth consecutive year of dividend growth.
TC has now raised its dividend at an average annual rate of 0.3% for the past five years. The TSI Dividend Sustainability Rating for TC Energy remains Highest.
The stock is now up 23% since the spinoff. It also trades at a reasonable 18.3 times the $3.86 a share that TC will probably earn in 2025. The shares yield a high 4.8%.
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