TC Energy (TSX:TRP) is up nearly 30% from the 12-month low. Investors who missed the rally are wondering if TRP stock is still undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and total returns.

TC Energy stock

A surge in interest rates in Canada and the United States in 2022 and 2023 triggered a pullback in the share prices of pipeline stocks. These businesses use debt to fund part of their growth program with projects that cost billions of dollars and take years to complete. Higher borrowing costs hurt profits and can reduce the cash that is available for distributions.

TC Energy's share price slid from $74 in June 2022 to less than $44 last year before bargain hunters started to buy the stock in anticipation of cuts to interest rates in 2024. The Bank of Canada has already reduced its rate this year, and the U.S. Federal Reserve is expected to begin cutting rates in the coming months. Inflation appears to be heading to the 2% target, and the central banks want to avoid driving the economy into a recession. As rates fall, more investors will likely move back into high-yield pipeline stocks.

Growth

TC Energy's share price came under added pressure due to the delays and costs associated with the construction of its Coastal GasLink pipeline. The project received the green light in 2018 but didn't reach mechanical completion until late last year. The final cost is estimated at $14.5 billion, more than double the original budget. Natural gas is expected to start flowing through the 670 km pipeline in 2025, so the challenges on the project are largely in the rearview mirror.

Management is doing a good job of monetizing non-core assets to raise funds to shore up the balance sheet. With asset sales of $5.3 billion in 2023 and an anticipated $3 billion in 2024, the company should be in good shape to pursue the rest of the growth program. TC Energy is also spinning off the oil pipelines business to unlock value for investors.

The company is targeting capital investments of about $8 billion in 2024 and $6 billion to $7 billion annually over the medium term to drive ongoing growth.

Dividends

As new assets go into service, there should be adequate cash flow growth to support steady dividend increases. TC Energy raised the dividend in each of the past 24 years. An annual increase in the 3-5% range is reasonable to expect over the next few years, supported by the capital program.

Outlook

TC Energy is primarily a natural gas transmission and storage company. Power generation and the oil pipelines round out the assets. Natural gas demand, both domestic and global, is expected to increase in the coming years, partly driven by the surge in power required by artificial intelligence data centres. The fuel is cleaner to burn than oil or coal to produce electricity, and gas-fired power plants will remain key suppliers of reliable power even as the world transitions to renewables.

Should you buy TRP stock now?

The stock isn't as cheap as it was last fall, but more upside should be on the way. Investors who buy TRP at the current share price can still get a 6.75% dividend yield, so the return is attractive. If you have some cash to put to work in a portfolio focused on high-yield dividends, this stock deserves to be on your radar.

The post TC Energy Stock: Buy, Sell, or Hold? appeared first on The Motley Fool Canada.