Hey there,
The timing here is interesting. TC Energy just held their annual investor day yesterday - this is where investors get insights into the coming years. I'd say it was a positive report. Not positive in the sense that investors can expect big positive changes, but positive in the fact that there were no major changes to its strategy. This is a good thing, cuz it did undergo some big changes last year that negatively impacted the stock.
It kept CAPEX, Dvidiedn growth and projects pretty much the same. Dividend growth is expected to be in the 3-5% range, indicating they believe the dividend is sustainable at these levels. Debt/EBITDA target aimined at 4.75xby end of Fiscal 2024 thanks in large part to a plan to sale ~$3B in assets. That said, EBITDA guidance for Fiscal 2023 was actually revised higher (8% vs 5-7%) and it guided to Fiscal 2024 EBITDA growth of 5-7%.
Also worth noting it is spinning off South Bow (liquids Pipeline) which is expected to take place in the second half of Fiscal 2024.
Overall, it is definitely a wait and see approach with TC Energy. If they can execute on their strategy, they will be in good shape going into Fiscal 2025. In our opinion, the debt load will still be pretty high but if rates stabilize and drop, that will only benefit the company.
At this point, the dividend seems reasonably safe given the payout ratio is expected to b 88% of earnings and should grow along with AFFO - but it needs to execute on its strategy for this to remain the case. Lot's of moving parts here and for me, it would be one I'd be paying close attention to.
Mat