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TC Energy (TSE:TRP) Is Paying Out A Larger Dividend Than Last Year

TC Energy Corporation (TSE:TRP) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of April to CA$0.96. This will take the annual payment to 7.0% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for TC Energy

TC Energy's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before this announcement, TC Energy was paying out 135% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.


EPS is set to grow by 80.8% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 82% which is a bit high but can definitely be sustainable.

TSX:TRP Historic Dividend March 15th 2024

TC Energy Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was CA$1.84, compared to the most recent full-year payment of CA$3.84. This implies that the company grew its distributions at a yearly rate of about 7.6% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Dividend Growth Is Doubtful

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. It's not great to see that TC Energy's earnings per share has fallen at approximately 7.0% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think TC Energy's payments are rock solid. Although they have been consistent in the past, we think the payments are a little high to be sustained. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for TC Energy (of which 2 are potentially serious!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.