South Bow Corp SOBO

Globe says South Bow may be boring, but 9.3% is sweet

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Globe says South Bow may be boring, but 9.3% is sweet

2024-10-07 05:08 ET - In the News

Also In the News (C-TRP) TC Energy Corp

The Globe and Mail reports in its Saturday edition that TC Energy completed its restructuring last week, spinning off South Bow Corp. The Globe's David Berman writes that there is a strong case for adding to your allotment if you want steady income from a generous dividend. South Bow, which transports Canadian crude oil to refining markets in the U.S. Midwest and Gulf Coast through the Keystone pipeline, begins life with a lot of debt: $7.5-billion, or 5.2 times 2023 earnings before interest, taxes, depreciation and amortization (EBITDA). Over 88 per cent of cash flow comes from long-term contracts with oil producers and refiners, while additional pipeline capacity can be constrained by a tough regulatory environment. In this sense, South Bow resembles a utility that offers stability over explosive profit potential. Its annualized dividend is a big one, at $2 (U.S.) a share. When the stock officially launched, the implied yield based on future dividend payments was a dazzling 9.3 per cent. For some companies, that might be a red flag. However, the likelihood of South Bow running into trouble right out of the gate seems unlikely. Moody's, S&P and Fitch have rewarded South Bow with an investment-grade stamp of approval.

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https://www.stockwatch.com/News/Item/Z-C!SOBO-3606217/C/SOBO