TSX Domination: The 7.12% Dividend Stock to Watch

Market analysts predict the TSX to perform better in 2024, but one high-yield dividend stock is set to dominate.

| More on:

The TSX battled inflationary pressures in 2023 and won with an 8.12% overall gain. Canadian stocks erased the losses of 2022, but some market analysts say it was a restrained rebound. Given the lower recession risks and possible start of rate cuts, they expect the returns to be far better this year.

Financial and energy stocks underperformed but are the sectors to watch in 2024. Besides these heavyweight sectors, many stocks in other sectors also trade at discounted prices. However, one high-yield dividend stock is a buying opportunity and is ready to dominate the TSX.

Top-of-mind choice

TC Energy (TSX:TRP) is a top-of-mind choice in the oil & gas midstream industry. The $54.5 billion energy infrastructure company derives revenue from diversified, high-quality assets. Dividend growth is also enticement for income investors. This pipeline stock is a Dividend Aristocrat owing to 23 consecutive years of dividend increases.

If you invest today, TRP trades at $52.53 per share (+1.49% year to date) and pays a lucrative 7.12% dividend. However, there’s more to look forward to apart from the higher earnings forecast for 2024. Five primary segments contribute to revenues: the natural gas pipelines in Canada, the U.S., and Mexico, power & energy solutions, and liquids pipelines.

The grand plan

TC Energy’s grand plan is to spin off its liquids pipeline segment and create two investment-grade publicly listed companies instead of one. “The spinoff will unlock the evident value we see from each company’s unique opportunity set. TC Energy will continue to cultivate a highly regulated, low-risk and utility-like portfolio with a balance of income and growth,” said TC Energy chief executive officer (CEO) François Poirier.

Management expects to finalize the spinoff in the second half of 2024 and introduce South Bow Corporation. Poirier added that both companies will pursue their own growth objectives and should deliver superior shareholder value in the next decade and beyond.

Post-transaction

TC Energy will focus on natural gas infrastructure after the spinoff. The company retains the long-term fundamentals of the segment supported by the power & energy solutions business, including nuclear, hydro energy storage and new energy opportunities.

Also, management has committed to proceeding with the $4.5 billion Ontario Pumped Storage Project together with the Saugeen Ojibway Nation. The project will generate 1,000 jobs during construction, and Ontario-based companies will provide 75% of the project’s materials and supplies.

Furthermore, Poirier said TC Energy will be an increasingly utility-weighted business with a stable balance sheet. The company expects comparable earnings before interest, taxes, depreciation, and amortization to grow at a 7% compound annual growth rate (CAGR) through 2026 and 2% to 3% CAGR for South Bow. Both have solid 3% to 5% annual dividend-growth outlooks.

Key takeaways

TC Energy’s appeal as a solid investment for long-term growth will not diminish during the separation and after the spinoff. Post-2024, the sanctioned annual net capital spending is between $6 and $7 billion. About 96% of the business are rate-regulated and supported by long-term contracts.

Domination is indeed on the horizon, as TC Energy’s profile turns low-risk due to the highly regulated, utility-like portfolio. The generous dividend should likewise remain consistent for years to come.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Investor wonders if it's safe to buy stocks now
Dividend Stocks

Brookfield Corp: Buy, Sell, or Hold in 2025

Brookfield Corp (TSX:BN) is looking great heading into 2025.

Read more »

ways to boost income
Dividend Stocks

3 Canadian Stocks That Paid Record Dividends in 2024

Some of the most potent dividend growers in 2024 are also worth considering in 2025, especially for their long-term holding…

Read more »

voice-recognition-talking-to-a-smartphone
Dividend Stocks

Should You Buy BCE Stock While It’s Below $33?

BCE stock is yielding 12%, as the company combats a highly competitive market and looks for growth in the U.S.

Read more »

calculate and analyze stock
Dividend Stocks

TFSA Investors: 3 Dividend Stocks to Consider Buying While They Are Down

These stocks offer attractive dividends right now.

Read more »

data analyze research
Dividend Stocks

Top Canadian Stocks to Buy Right Away With $2,000

These two Canadian stocks are the perfect pairing if you have $2,000 and you just want some easy, safe, awesome…

Read more »

money goes up and down in balance
Dividend Stocks

Take Full Advantage of Your TFSA With These 5 Dividend Stars

Choosing the right dividend stars for your TFSA can be tricky, especially if your goal is to maximize the balance…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

The Best Canadian Dividend Stocks to Buy and Hold Forever in a TFSA

These three top dividend stocks are ideal for your TFSA due to their consistent dividend payouts and healthy yields.

Read more »

open vault at bank
Dividend Stocks

1 Magnificent TSX Dividend Stock, Down 10%, to Buy and Hold for a Lifetime

A recent dip makes this Big Bank stock an attractive buying opportunity.

Read more »