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TC Energy (TRP) Stock Up 37% YTD: What's Going in its Favor?

Zacks Equity Research

TC Energy Corporation TRP has had an impressive run on the bourses, both in absolute and relative terms. Shares of this diversified midstream company have gained 37% on a year-to-date basis, handily outperforming the industry’s collective growth of just 19%. Let’s delve deeper into the factors behind the stock’s price uptick.

TC Energy displays an impressive earnings surprise history. The firm delivered the 6th consecutive earnings beat in first-quarter 2019, driven by strong project execution. The company reported comparable EBITDA of C$2.4 billion during the quarter, up from C$2.1 billion in the year-ago period. Its distributable cash flows also increased 14% y/y.

TC Energy’s buyout of U.S. midstream operator Columbia Pipeline Group has been a major driving force for the firm. In addition to scale advantages and increasing network reach, the Columbia Pipeline buyout helped the company to significantly improve the backlog of near-term commercial projects. Currently, TC Energy’s portfolio includes around C$30 billion of accretive growth projects to be placed into service through 2023.Of this, around C$7 billion worth projects are expected to be completed by the end of the year.The strong inventory of near-to-medium-term growth projects should support TC Energy’s continued earnings and cash flow improvement. 

The firm’s remarkable dividend record further boosts investors’ sentiments. The energy infrastructure operator, which has been handsomely rewarding its shareholders, had increased dividends in each of the last 19 years. Considering the low-risk operational profile and predictable cash flows, its stated dividend growth commitment of 8-10% annually through 2021 should be achievable.

We believe TC Energy is a kind of ‘set-it-and-forget-it’ stock that is worth retaining in your portfolio on the back of its stability, long-term growth prospects and shareholder wealth creation. The company’s wide array of natural gas midstream properties positions it for solid long-term growth and a promising future as demand for the commodity soars, spurred by its cost effectiveness, secular shift to cleaner burning fuel for power generation and abundant supply in North America.

While TC Energy carries a Zacks Rank #3 (Hold), investors can consider better-ranked midstream players like EQT Midstream Partners, LP EQM, Holly Energy Partners, L.P. HEP and Plains Group Holdings, L.P. PAGP, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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