TC Energy shareholders approve South Bow spinoff

TC Energy shareholders approved its split into two public companies at the recent annual meeting.

A new company called South Bow Corp. will hold its pipeline assets while TC Energy will retain the natural gas and nuclear power plant assets.

TC Energy president and chief executive, François Poirier said the move will allow each company to focus on its strengths.

The spinoff will complete this fall with TC Energy shareholders receiving 0.2 shares of South Bow for every 1 share of TC Energy they own. It will be a tax-free distribution.

Following the spinoff, TC Energy plans to increase its dividend by 3% to 5% a year. The company says the combined dividends of the two companies will be equivalent to TC Energy’s annual dividend prior to the spinoff.  The ratio will be roughly TC Energy (86%) and South Bow (14%).

Spinoffs are often good for investors for many reasons including the fact that the businesses are well developed and have a track record that includes many market cycles, both good and bad.

They have experienced management teams that can be more agile once they’re out from under the bigger umbrella. They also come with longstanding marketing and distribution networks. The parent often retains a stake, as TC Energy plans to do with South Bow, which is another incentive for them to set the spinoff up for success.

TC Energy raised its dividend by 3.2% to $0.96 quarterly with the April 30 payment. At the current price of $53.25 the dividend yields a high 7.21%.

This is an edited version of an article appeared in the Internet Wealth Builder on Jun. 13, 2024.  For information on how to reprint this article please view this page.