Member-only story
Earn 8.5% Dividends With This “Safe” Stock?
In 2024, TC Energy — a large Canadian energy company — spun off one of its large assets into a standalone company. This company is called South Bow (SOBO). TC Energy did this to differentiate its business segments and create more pure-play investments, likely to attract more investors and indexes to their various business segments, ultimately hoping to increase each business's value.
About South Bow (SOBO)
South Bow is a pure-play oil pipeline operator whose business is shipping heavy crude oil from Alberta, Canada, to U.S. refining markets. Even after the spinoff, South Bow is a decent-sized company. They have a market cap of $7 billion and annual revenues of around $2 billion. The pipeline business is seen as “safe” because they aren’t directly impacted by the ups and downs of the oil markets. They collect their fees for transporting that oil regardless of the oil price. Producers of that oil don’t have much choice but to ship it out via South Bow’s pipelines even in low oil price environments, because the raw product doesn’t serve them much good if they just pull it out of the ground and don’t send it anywhere.
South Bow’s strategy is to pay a large and sustainable dividend to shareholders. Since they only spun off in 2024, they are using the proceeds of their operations to pay the dividend and to…
