Is it a good company at a reasonable price? Currently, I plan to hold on to the South Bow Corp stock I received from TC Energy, but I do not plan to buy anymore at this time. The dividend yield is very high. I want to wait and see what happens first. As far as I can see, the stock is at a reasonable price.
I own this stock of South Bow Corp (TSX-SOBO, NYSE-SOBO). I got this stock because it was a spin-off of TC Energy on October 3, 2024.
When I was updating my spreadsheet, I noticed this stock was spin-off of TC Energy (TSX-TRP, NYSE-TRP) 3 October 2024. With the spin-off investors got .2 shares of South Bow Corp for every share that they had of TC Energy. I got shares in South Bow on October 3, 2024. This stock started trading on the NYSE on October 3, 2024. This stock started trading on the TSX on September 25, 2024.
The current dividend yield is high with no dividend growth. The current dividend yield is high (7% and higher) at 8.29%. So far there has been no change in the dividends paid since this stock was issued. Analysts do not expect any dividend changes over the next 3 years. Dividends are paid in US Dollars.
The Dividend Payout Ratios (DPR) are good. The DPR for 2024 for Earnings per Share (EPS) is good at 33%. The DPR for 2024 for Adjusted Earnings per Share (AEPS) is good at 27%. The DPR for 2024 for Cash Flow per Share (CFPS) is good at 20%. The DPR for 2024 for Free Cash Flow (FCF) is good at 22%, but there is not agreement on what the FCF is.
| Item | Cur |
|---|---|
| EPS | 32.89% |
| AEPS | 27.17% |
| CFPS | 19.97% |
| FCF | 22.13% |
Debt Ratios show that this company has too much debt. The Long Term Debt/Market Cap Ratio for 2024 is too high at 1.17 and currently at 1.14. Utilities tend to have a lot of debt. The Liquidity Ratio for 2024 is low at 1.25 and 1.25 currently. If you added in Cash Flow after dividends, the ratios are still low at 1.45 and currently at 1.19. I prefer these ratios to be at 1.50 or higher. The Debt Ratio for 2024 is low at 1.30 and 1.30 currently. I prefer this ratio to be at 1.50 or higher. The Leverage and Debt/Equity Ratios for 2024 are too high at 4.34 and 3.34 and currently at 4.34 and 3.43. I prefer these ratios to be below 3.00 and 2.00.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 1.17 | 1.14 |
| Intang/GW | 0.00 | 0.03 |
| Liquidity | 1.25 | 1.25 |
| Liq. + CF | 1.45 | 1.19 |
| Debt Ratio | 1.30 | 1.30 |
| Leverage | 4.34 | 4.34 |
| D/E Ratio | 3.34 | 3.34 |
This company started to trade on the TSX at $30.00 and finished the year at 33.92, an increase of 13.07%. The current stock price is $33.42, a decrease of 1.47%. I cannot do any chart on Total Return as there is not enough data.
The 1-year low, median, and high median Price/Earnings per Share Ratios are 13.29, 15.18 and 17.06. The current P/E Ratio is 14.64 based on a stock price of $33.42 and EPS estimate for 2025 $2.28 ($1.65 US$). This ratio is between the low and median ratios of the 1 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in CDN$.
I also have Adjusted Earnings per Share (AEPS) data. The 1 year low, median, and high median Price/Adjusted Earnings per Share Ratios are 10.98, 12.54 and 14.09. The current P/AEPS Ratio is 16.32 based on a stock price of $33.42 and AEPS estimate for 2025 of $2.16 (1.56 US$). This ratio is above the high ratio of the 1 year median ratios. This stock price testing suggests that the stock price is relatively expensive. This testing is in CDN$.
I get a Graham Price of $34.02. The 1-year low, median, and high median Price/Graham Price Ratios are 0.85, 0.98 and 1.10. The current ratio is 1.01 based on a stock price of $33.42. This ratio is between the median and high ratios of the 1 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in CDN$.
I get a 1-year median Price/Book Value per Share Ratio of 1.94. The current P/B Ratio is 1.92 based on a stock price of $24.14, Book Value of $2,610M and Book Value per Share of $12.55. The current ratio is 0.9% below the 1 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in US$. You get a slightly different results in CDN$ because this stock is traded more on the TSX than NYSE.
I also have estimates for Book Value per Share for 2025 of $12.11. This implies a P/B Ratio of 1.99 with a stock price of $24.14 and Book Value of $2,519M. This ratio is 2.6% above the 1 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in US$.
I get a 1-year median Price/Cash Flow per Share Ratio of 9.73. The current ratio is 8.41 based on Cash Flow per Share estimate for 2025 of $2.87, Cash Flow of $597M and a stock price of $24.14. This ratio is 12% below the 1 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in US$. You get a similar result in CDN$.
I get a 1 year and historical median dividend yield of 8.21%. The current dividend yield is 8.29% based on a stock price of $24.14 and dividends of $2.00. The current dividend yield is 0.9% above the 1 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in US$. You get a slightly different results in CDN$ because this stock is traded more on the TSX than NYSE.
The 2-year median Price/Sales (Revenue) Ratio is 1.20. The current P/S Ratio is 2.44 based on Revenue estimate for 2025 of $2,061M, Revenue per Share of $9.91 and a stock price of $24.14. The current ratio is 104% above the 2 year median ratio. This stock price testing suggests that the stock price is relatively expensive. The problem is that analysts expect a drop in Revenue of 3% for 2025 and the stock price has gone up.
Results of stock price testing is that the stock price is the stock is still reasonable compared to 2024, but we have limited testing to go on. Analysts’ recommendations are all over the place.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (1), Hold (9) and Sell (2). The consensus would be a Hold. The 12 month stock price consensus is $34.41 ($24.90 US$) with a high of $41.79 ($30.24 US$) and low of $23.99 ($17.36 US$). The consensus stock price of $34.41 implies a total return of 11.24% with 2.97% from capital gains and 8.27% from dividends based on a stock price of $33.42.
Analyst vary on this stock on Stock Chase. Analysts go from Do not Buy to Hold to Buy. They think it has a great yield, but will have little to no growth prospects. Christopher Liew on Motley Fool likes this for the dividends but worries about headwinds from US Tariffs. Jitendra Parashar on Motley Fool likes this stock for stability and growth. The company put out a press release via Global Newswire about their fourth quarter of 2024.
Simply Wall Street via Yahoo Finance put out a short review on this stock. Simply Wall Street via Yahoo Finance and talks about the fact that this company is largely controlled by Institutional Shareholders. Simply Wall Street has 3 warnings out on this stock of interest payments are not well covered by earnings; profit margins (14.9%) are lower than last year (22%); dividend of 8.28% is not well covered by free cash flows.
South Bow Corp is an energy infrastructure company. The company is engaged in constructing pipelines system safely transports liquids like crude oil, across Canadian provinces, U.S. states, and Gulf coasts. Its web site is here South Bow Corp.
The last stock I wrote about was about was Pembina Pipelines Corp (TSX-PPL, NYSE-PBA) … learn more. The next stock I will write about will be Canadian Natural Resources (TSX-CNQ, NYSE-CNQ) … learn more on Friday, April 25, 2025 around 5 pm. Tomorrow on my other blog I will write about Human Side of Trade…. learn more on Thursday, April 24, 2025 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
