TC Energy spun off its oil pipeline assets last October with TC shareholders receiving one share of the new South Bow Corp. for every five shares of TC Energy they owned.
South Bow has a 4,900 km pipeline network in Canada and the US which moves crude oil from Western Canada to refineries on the US Gulf Coast, via Oklahoma. Its largest asset is the Keystone pipeline.
Income Investor
About 90% of its revenue comes from long-term contracts with oil companies. This offers a stable cash flow, however as part of the spin off, South Bow borrowed US$7.9 billion to pay for the pipeline network. This has left it with a high long-term debt of US$5.8 billion, as reported in its latest quarter.
South Bow set its dividend at US$0.50 quarterly with the first payment made in January. The dividend has a high yield of 7.23%, reflecting the high debt. Since a large portion of cash flow goes to interest payment, this leaves less of a cushion for dividend payments if earnings fall. And, for now, little room for the dividend to rise. - Adam Mayers
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SOBO was first recommended here on October 9, 2024