Is it a good company at a reasonable price? This is a utility stock and has produced at or close to 8% per year. Most of the return is from dividends and this is quite common with utility stocks. I own this stock and plan to hold on to the share that I own. The price is certainly reasonable with the dividend yield tests showing the stock as cheap. Insider buying is certainly a good sign. The debt level is high which is a concern, but high debt levels also come with utilities.
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 bought this stock, it was on Mike Higgs' Canadian Dividend Growth Stock list and the other dividend lists that I followed.
When I was updating my spreadsheet, I noticed that all the insiders I follow have bought shares over the past years. This includes the CEO, CFO, Officer, 3 Directors and the Chairman. This is very positive sign.
I have done well with this stock. I think a total return of 8% or above is what is acceptable. My total return is 9.21% with 3.36% from dividends and 5.85% from capital gains. It is typical of a utility to have a good portion of the total return from dividends. I have had this stock for 24 years.
If you had invested in this company in December 2013, for $1,019.34 you would have bought 21 shares at $48.54 per share. In December 2023, after 10 years you would have received $590.84 in dividends. The stock would be worth $1,086.96. Your total return would have been $1,677.80. This would be a total return of 6.09% per year with 0.64% from capital gain and 5.44% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $48.54 | $1,019.34 | 21 | 10 | $590.84 | $1,086.96 | $1,677.80 |
The current dividend yield is high with dividend growth low. The current dividend yield is high (7% and higher) at 6.97%. The 5 year median dividend yield is good (5% to 6% ranges) at 5.59%. The 10 year and historical median dividend yields are moderate (2% to 4% ranges) at 4.97% and 4.34%. The dividend increases are low (below 8% per year) at 6.5% per year over the past 5 years.
The Dividend Payout Ratios (DPR) are fine because of DPR for FFO and AEPS. The DPR for 2023 for Earnings per Share (EPS) is too higher at 134% with 5 year coverage at 118% however, the FFO and AEPS are more important The DPR for 2023 for Funds from Operations (FFO) is good at 48% with 5 year coverage at 43%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is fine at 81% with 5 year coverage at 78%. The DPR for 2023 for Cash Flow per Share (CFPS) is fine at 54% with 5 year coverage at 47%. The DPR for 2023 for Free Cash Flow 1 and 2 (FCF) are negative and FCF is negative.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 134.18% | 117.81% |
| FFO | 47.63% | 43.92% |
| AEPS | 81.64% | 78.36% |
| CFPS | 54.22% | 46.53% |
| FCF 1 | -362.32% | -592.72% |
| FCF 2 | -445.81% | 972.21% |
Debt Ratios of Liquidity and Leverage are a problem as the company has too much debt. The Long Term Debt/Market Cap Ratio for 2023 is fine at 0.93 and currently at 0.88. The Liquidity Ratio for 2023 is a low at 0.96. If you added in Cash Flow after dividends, the ratios are even lower at 0.75 and better currently at 1.27. For utilities you can add back the current portion of the debt to get another value, but always check that the debt can be rolled over, and with the current portion of the debt the current Liquidity Ratio would be 3.39 and 3.19 which are good. The Debt Ratio for 2023 is fine at 1.45. The Leverage and Debt/Equity Ratios for 2023 are too high at 3.21 and 2.21 and even higher currently at 4.58 and 3.58. I prefer these ratios below 3.00 and below 2.00.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.93 | 0.88 |
| Intang/GW | 0.23 | 0.22 |
| Liquidity | 0.96 | 0.96 |
| Liq. + CF | 0.75 | 1.27 |
| Liq. + CF + D | 3.39 | 3.19 |
| Debt Ratio | 1.45 | 1.28 |
| Leverage | 3.21 | 4.58 |
| D/E Ratio | 2.21 | 3.58 |
The Total Return per year is shown below for years of 5 to 35 to the end of 2023. 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. |
|---|---|---|---|---|---|
| 2018 | 5 | 6.49% | 7.89% | 1.21% | 6.88% |
| 2013 | 10 | 7.32% | 6.09% | 0.64% | 5.44% |
| 2008 | 15 | 6.47% | 8.56% | 3.01% | 5.55% |
| 2003 | 20 | 6.34% | 8.32% | 3.14% | 5.17% |
| 1998 | 25 | 4.67% | 8.25% | 3.33% | 4.92% |
| 1993 | 30 | 4.97% | 8.08% | 3.20% | 4.88% |
| 1988 | 35 | 4.95% | 9.21% | 3.86% | 5.35% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 16.45, 18.81 and 21.16. The corresponding 10 year ratios are 16.93, 18.46 and 19.99. The corresponding historical ratios are 12.33, 14.06 and 16.15. The current P/E Ratio is 13.04 based on a stock price of $55.13 and EPS estimate for 2024 of $4.23. 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 11.75, 14.35 and 16.95. The corresponding 10 year ratios are 12.51, 14.84 and 17.67. The current ratio is 13.19 based on AEPS estimate for 2024 of $4.18 and a stock price of $55.13. 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 Graham Price of $49.52. The 10-year low, median, and high median Price/Graham Price Ratios are 0.98, 1.18 and 1.41. The current P/GP Ratio is 1.11 based on a stock price of $55.13. This ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Book Value per Share Ratio of 2.11. The current Ratio is also 2.11 based on a Book Value of $27,054M, Book Value per Share of $26.08 and a stock price of $55.13. The current ratio is the same as the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and at the median.
I also have a Book Value per Share estimate for 2024 of $26.90. This estimate is based on a different way of calculating the Book Value and this way, the 10 year median ratio is 1.87. The estimate of $26.90 implies a ratio of 2.05 with a Book Value of $27,908M and a stock price of $55.13. This analysis expects the book value to go down over the next year. The ratio of 2.05 is 10% above the 10 year median ratio of 1.87. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 8.53. The current P/CF Ratio is 7.53 based on Cash Flow per Share estimate for 2024 of $7.32, Cash Flow of $7,594M and a stock price of $55.13. The current ratio is 12% 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 4.34%. The current dividend yield is 6.97% based on dividends of $3.81 and a stock price of $55.13. The current dividend yield is 60% 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 4.97%. The current dividend yield is 6.97% based on dividends of $3.81 and a stock price of $55.13. The current dividend yield is 40% 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 3.93. The current P/S Ratio is 3.51 based on Revenue estimate for 2024 of $16,315M, Revenue per Share of $15.73 and a stock price of $55.13. The current ratio is 11% 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 probably reasonable and may even be cheap. The dividend yield testing is showing the stock price as cheap. The P/S Ratio test says that the stock price is reasonable. The rest of the testing is showing the stock price as either cheap or reasonable.
When I look at analysts’ recommendations, I find Strong Buy (4), Buy (5), Hold (12), Underperform (1) and Sell (1). The consensus would be a Buy. The 12 month stock price is $56.17 with a high of $63.00 and low of $44.00. The current consensus of $56.17 implies a total return of 8.85% with 1.89% from capital gains and 6.97% from dividends.
There are 14 recommendations on this stock on Stock Chase with 11 buys, 2 Holds and 1 Do Not Buy. The Do Not Buy says there are better stocks in this space. Stock Chase gives this company 5 stars out of 5. Rajiv Nanjapla on Motley Fool says this is a top dividend stock to buy. Puja Tayal on Motley Fool says you can lock in a 7% dividend if you invest in this stock now. The company put out a Press Rele about their fourth quarter of 2023 results.
Simply Wall Street via Yahoo Finance reviews this stock. They think that the dividend is not probably covered. They give this company 2 and one half stars out of 5. They list 4 warnings signs of dividend of 7.03% is not well covered by earnings or cash flows; interest payments are not well covered by earnings; large one-off items impacting financial results.
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, more than 650 billion cubic feet of natural gas storage, and about 4,300 megawatts of electric power. 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 27, 2024 around 5 pm. Tomorrow on my other blog I will write about How I Invest My Own Money.... learn more on Tuesday, March 26, 2024 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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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