TC Energy (TSX:TRP) Increases Dividend Payout Compared to Last Year

TC Energy Corporation (TSX:TRP) has recently announced a dividend increase, set to take effect on April 30th, raising the payment to CA$0.96. This adjustment brings the annual dividend to 7.0% of the stock price, surpassing the industry average.


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Evaluating TC Energy's Dividend

Before delving into the implications of this announcement, it's crucial to evaluate the sustainability of TC Energy's dividend, especially in the context of TSX dividend stocks. Preceding this update, the company was paying out 135% of its earnings, with no surplus free cash flows. Such a significant dividend payout ratio, coupled with the absence of free cash flows, raises concerns about the long-term viability of the dividend.


However, there's optimism regarding earnings per share (EPS) growth, projected to rise by 80.8% in the coming year. If recent trends in dividend payments persist, the payout ratio could reach 82% in 12 months, indicating a slightly elevated yet potentially sustainable level.

TC Energy's Track Record

Despite current concerns, TC Energy has maintained a commendable record of dividend payments with minimal fluctuations. From 2014 onwards, the company has consistently increased its annual dividend, growing distributions at an average rate of approximately 7.6% per year. This consistent growth, without significant cuts in dividends, contributes positively to shareholder returns, making it an appealing option within TSX energy sector stocks.

Uncertainty Surrounding Dividend Growth

While TC Energy's dividend history may attract investors, there are underlying challenges. The company has experienced a decline in earnings per share, averaging around 7.0% annually over the past five years. A downward trend in earnings could potentially limit future dividend growth, emphasizing the importance of monitoring earnings forecasts for signs of stabilization.

Conclusion

In conclusion, while the dividend increase is encouraging, caution is warranted regarding TC Energy's dividend sustainability. Despite past consistency, the current payout levels may be unsustainable, particularly given the company's earnings trajectory. While dividend payments are crucial, they should not be the sole factor in evaluating a company's investment potential.


Investors should also consider other aspects of TC Energy's financial health and operations to make informed decisions. It's essential to note that TC Energy exhibits some warning signs, highlighting the importance of thorough due diligence before investing. For investors seeking high-yielding dividend opportunities, it's advisable to explore a diversified range of options.
Location: Canada

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