TC Power (TSX:TRP) is up 17% since early October. Buyers who like high-yield dividend shares are questioning if TRP inventory continues to be undervalued and good to purchase for a self-directed Tax-Free Financial savings Account (TFSA) portfolio targeted on passive earnings.

TRP inventory worth

TC Power trades for near $53.50 on the time of writing. That is up from a low of round $45 that the inventory closed out at a few occasions final 12 months earlier than a shift in market sentiment on the route of rates of interest triggered the rally.

TC Power makes use of debt to fund a part of its massive capital program. The steep rise in rates of interest in Canada and america over the previous two years drove up borrowing prices for firms. As debt bills rise, there’s a destructive affect on income and the amount of money that is likely to be obtainable for distributions. Markets count on the central banks to begin slicing charges in 2024. This could present a tailwind for TRP inventory.

TC Power had some points with surging prices on a serious venture over the previous couple of years. The Coastal GasLink pipeline had an unique funds of about $6.2 billion when the corporate gave the 670 km pipeline growth the inexperienced gentle in 2018. Coastal GasLink lastly achieved mechanical completion in 2023, however the ultimate invoice is predicted to be about $14.5 billion.

Administration spent a lot of 2023 working to scale back debt. The corporate introduced in $5.3 billion by way of the sale of pursuits in some American belongings. TC Power has at the very least one other $3 billion in belongings gross sales beneath dialogue for 2024. The corporate additionally expects to unlock worth for purchasers by spinning off the oil pipelines enterprise this 12 months. As such, many of the stability sheet ache needs to be within the rearview mirror.

Earnings

Challenges on the Coastal GasLink venture garnered many of the market consideration final 12 months, however TC Power’s total asset portfolio carried out higher than anticipated. The corporate generated document working and monetary leads to 2023, with comparable earnings per share rising 5% to $4.52.

Dividends

TC Power raised the dividend by 3.2% for 2024. That is the twenty fourth consecutive annual dividend enhance by the board. Administration expects the strong capital program to generate satisfactory money move development to help annual will increase of at the very least 3% over the medium time period. The capital program for 2024 is predicted to be at the very least $8.0 billion as the corporate strikes forward with new initiatives.

Buyers who purchase TRP inventory on the present degree can get a 7.2% dividend yield.

Must you purchase TRP inventory now?

TE Power isn’t as low cost because it was a number of months in the past, however the inventory continues to be down significantly from the $74 it reached in 2022. Administration is doing a very good job of decreasing debt and shoring up the stability sheet to maneuver forward with the expansion program.

Ongoing volatility needs to be anticipated, and it wouldn’t be a shock to see a pullback after the large run over the previous few months. Nonetheless, the inventory nonetheless seems to be engaging proper now, and traders receives a commission nicely to trip out extra turbulence. You probably have some money to place to work in a TFSA concentrating on passive earnings, TRP inventory deserves to be in your radar.