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Canada’s energy giant TC Energy just posted a $1 billion loss in Q1

Canada's energy giant TC Energy just posted a $1 billion loss in Q1

TC Energy (TSX: TRP) is one of Canada’s largest companies. In the first quarter of 2021, the energy giant posted a net loss of $1.1 billion or $1.11 per share compared to net income of $1.1 billion or $1.22 per share in the prior-year period. TC Energy’s net loss was attributed to an asset impairment charge amounting to $2.2 billion related to the suspension of the Keystone XL pipeline permit by the Joe Biden government. 

During its earnings release, TC Energy’s President and CEO François Poirier said, “While we were very disappointed by the revocation of the Presidential Permit for Keystone XL and the resulting after-tax impairment charge, we are well-positioned to deliver sustainable, high-quality growth in the years ahead.”

TC Energy’s 5-year growth chart.

However, after accounting for this one-time loss, TC Energy reported an adjusted profit of $1.1 billion or $1.16 per share in the March quarter. The company’s board of directors also declared a quarterly dividend of $0.87 per share, equivalent to $3.48 per share on an annual basis. Given TC Energy’s current stock price of $60.68, its forward yield stands at a healthy 5.74%. 

TC Energy is a well-diversified company

Despite macro-economic challenges, TC Energy’s diversified portfolio of cash-generating assets showcased its resiliency. In the last 14 months, TC Energy has been impacted by volatility in oil prices, weather events, and the ongoing pandemic. Still, the company has managed to sustain and even increase dividend payments in this period. 

TC Energy is now advancing a $20 billion secured capital program which will help it improve cash flows going forward and support dividend increases in the future. A majority of its capital projects are secured by long-term contracts, which gives TC Energy visibility to earnings and cash flow. 

Since the start of 2000, TC Energy’s robust business model has allowed it to generate annual returns of 12% to shareholders. Around 95% of its EBITDA is tied to rate-regulated assets or long-term contracts, due to which the company expects to increase dividend payments between 5% and 7% going forward. 

Analysts tracking TC Energy stock have a 12-month average target price of $69, which is 15% above the current trading price. After accounting for its dividend yield, total returns will be closer to 21%. 

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