TC Energy Corp

Sound bite for Twitter and StockTwits is: Dividend Growth Utility. Results of stock price testing is that the stock price is reasonable and judging by the dividend yield tests probably cheap. Debt Ratios need to be improved. The Dividend Payout Ratios (DPR) for AEPS is important and good. The dividend yields are high with dividend growth low. See my spreadsheet on TC Energy Corp.

Is it a good company at a reasonable price? There are some worries about this company, but overall, I think that it is a good utility company to hold. I will not be buying anymore because I have enough of my portfolio invested in this company. The price is reasonable and is probably cheap.

I own this stock of TC Energy Corp (TSX-TRP, NYSE-TRP). I bought the stock in 2000 at an opportune time. The company had been cutting their dividend payments in order to re-organize and get the company into shape for long term profitability. This company’s stock fell hard because of this. People who depend on dividends for their income can be an unforgiving lot and can get really upset at company when a trusted company cuts its dividends.

When I was updating my spreadsheet, I noticed I have had this stock for 23 years and I have made 9.42% per year with 3.65% from capital gains and 5.77% from dividends. I also noticed that the stock price this year in is $54.31 compared to a year ago when it was $68.10 when I updated my stock price for February 28, 2023.

One interesting thing is that TD Securities stock reports on Utilities used to include Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO). For this stock, they have stopped reporting on this. They are now focused on Adjusted Earnings per Share (AEPS). This item has become very popular lately.

If you had invested in this company in December 2012, for $1,034.44 you would have bought 22 shares at $47.02 per share. In December 2022, after 10 years you would have received $577.83 in dividends. The stock would be worth $1,187.56. Your total return would have been $1,765.39.

Cost	Tot. Cost	Shares	Years	Dividends	Stock Val	Tot Ret
$47.02	$1,034.44	22	10	$577.83	$1,187.56	$1,765.39

The dividend yields are high with dividend growth low. The current dividend yield is high (7% and above) at 7.10%. The 5 year dividend yield is good (5% and 6% ranges) at 5.11%. The 10 year and historical dividend yields are moderate at 4.61% and 4.32%. The dividend growth is low (below 8%) at 7.91% per year over the past 5 years. The last dividend increase was in 2023 and it was for 3.3%. Over the past 34 years, dividends have increased 31 times and decreased 2 times. The last dividend decrease was in 2000.

The Dividend Payout Ratios (DPR) for AEPS is important and good. The DPR for EPS for 2022 is 558% with 5 year coverage at 102%. The DPR for EPS is expected to be 87% in 2023. The DPR for Adjusted Earnings per Share (AEPS) for 2022 is 83% with 5 year coverage at 76%. This is an important one. The DPR for 2022 for Funds from Operations (FFO) is 48% with 5 year coverage at 43%. The DPR for Cash Flow per Share (CFPS) for 2022 is 52% with 5 year coverage at 43%. The DPR for CFPS for 2023 is also expected to be 52%. This is high and a DPR for 40% or lower is better. Analysts cannot agree to the Free Cash Flow (FCF) and there are huge differences.

Debt Ratios need to be improved. The Long Term Debt/Market Cap is 0.72 and this is fine. The Liquidity Ratio is 0.43, add in cash flow after dividends it is 0.47 and the add back the current portion of the long term debt and it is just 0.92. It means that current assets cannot cover current liabilities and can be a problem. It needs to be above 1.00 and much better at 1.50. The Debt Ratio is 1.43 and this is low and is best at 1.50 or higher. The Leverage and Debt/Equity Ratios are 3.35 and 2.35 and these are too high and are best below 3.00 and below 2.00.

The Total Return per year is shown below for years of 5 to 34 to the end of 2022. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.

From	Years	Div. Gth	Tot Ret	Cap Gain	Div.
2017	5	7.91%	2.93%	-2.47%	5.40%
2012	10	7.45%	6.46%	1.39%	5.07%
2007	15	6.65%	6.55%	1.93%	4.62%
2002	20	6.57%	9.71%	4.38%	5.34%
1997	25	4.53%	6.04%	2.13%	3.91%
1992	30	5.20%	8.69%	3.75%	4.94%
1988	34	5.00%	9.29%	4.10%	5.18%

The 5-year low, median, and high median Price/Earnings per Share Ratios are 12.34, 13.95 and 16.48. The corresponding 10 year ratios are 17.80, 18.85 and 19.91. The corresponding historical ratios are 12.32, 14.04 and 16.05. The current P/E Ratio is 12.32 based on a stock price of $52.38 and EPS estimate for 2023 of $4.25. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. However, the 10 year median ratios seem high for a utility.

I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 12.22, 14.35 and 16.95. The corresponding 10 year ratios are 13.89, 16.92 and 19.54. The current P/AEPS Ratio is 12.18 based on a stock price of $52.38 and AEPS estimate for 2023 of $4.30. The current ratio is below the low ratio for the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.

I get a Graham Price of $54.39. The 10-year low, median, and high median Price/Graham Price Ratios are 1.05, 1.25 and 1.43. The current ratio is 0.96 based on a stock price of $52.38. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.

I get a 10-year median Price/Book Value per Share Ratio of 2.11. The current P/B Ratio is 1.69 based on a stock price of $52.38, Book Value of $31,491M and a Book Value per Share of $30.94. The current ratio is -19.8% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I also have an Book Value per Share (BVPS) estimate of $32.60. The analyst calculated the Book Value differently from me and their 10 year median P/BV Ratio is 1.87. This estimate leads to a ratio of 1.61 with Book Value of $33,186M, and stock price of $52.38. This P/B Ratio is 14% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a 10-year median Price/Cash Flow per Share Ratio of 8.77. The current P/CF Ratio is 7.33 based on Cash Flow per Share (CFPS) estimate of $7.15, Cash Flow of $7,278M and a stock price of $52.38. This P/CF ratio is 16% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get an historical median dividend yield of 4.32%. The current dividend yield is 7.10% based on dividends of $3.72 and a stock price of $52.38. The current dividend yield is 64% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.

I get a 10 year median dividend yield of 4.61%. The current dividend yield is 7.10% based on dividends of $3.72 and a stock price of $52.38. The current dividend yield is 54% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.

The 10-year median Price/Sales (Revenue) Ratio is 3.94. The current P/S Ratio is 3.41 based on Revenues of $15,659M, Revenue per Share of $15.38 and a stock price of $52.38. The current ratio is 14% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

Results of stock price testing is that the stock price is reasonable and judging by the dividend yield tests probably cheap. The dividend yield tests say that the stock price is cheap. The P/S Ratio tests say the stock price is reasonable and below the median. All the testing says the stock price is either cheap or reasonable and below the median.

When I look at analysts’ recommendations, I find strong Buy (4), Buy (7), Hold (7), Underperform (1), and Sell (3). The consensus would be a Hold. The 12 months stock price consensus is $60.79. This implies a total return of 23.16% with 16.06% from capital gains and 7.10% from dividends. Michael Sprung on Stock Chase says we may not see dividend increases going forward. Barry Schwartz on Stock Chase says inexcusable cost overruns on Coastal Gas Link Pipeline. John O’Connell agrees. See Stock Chase.

The last 3 analysts on Stock Chase say Hold and Do not Buy. Stock Chase gives this stock 5 stars out of 5. This is number 19 on Money Sense list. Joey Frenette on Motley Fool says this stock is too cheap to avoid. Rajiv Nanjapla on Motley Fool thinks this stock is undervalued. The company put out a Press Release on their 2022 results.

Simply Wall Street has a report on Yahoo Finance about this stock. Simply Wall Street has Interest payments are not well covered by earnings; dividend of 7.15% is not well covered by earnings or cash flows; large one-off items impacting financial results; profit margins (4.3%) are lower than last year (13.6%); and Shareholders have been diluted in the past year.

TC Energy operates natural gas, oil, and power generation assets in Canada and the United States. The firm operates more than 60,000 miles of oil and gas pipelines. Its web site is here TC Energy Corp.

The last stock I wrote about was about was TransAlta Corp (TSX-TA, NSYE-TAC) ... learn more. The next stock I will write about will be AltaGas Ltd (TSX-ALA, OTC-ATGFF) ... learn more on Wednesday, March 29, 2023 around 5 pm. Tomorrow on my other blog I will write about Keyera Inc .... learn more on Tuesday, March 28, 2023 around 5 pm.

This blog is meant for educational purposes only and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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