Canadian pipeline firm TC Energy (TRP) and US firm AT&T (T) only have a high yield and a weak stock in common. Which one is a stock that income investors should buy?
TRP stock held the US $40 level for most of the year. The over 7% yield failed to attract investors at that time. TRP stock plunged from $40 to $34.17 by July 28, 2023, after the company posted good results. It also said it would spin off its liquids pipeline business.
TC Energy wants to separate the liquids business to unlock value. Once split, TC Energy will focus on natural gas infrastructure and alternative energy businesses. The liquids pipeline business will focus on its existing ~ 3,000 miles of crude oil pipelines.
Telecom firm AT&T reported flat revenue growth (+0.9% Y/Y) to $29.92 billion. It posted Q2 free cash flow of $4.2B, compared to the $3.8B expected. FCF is a critical measure because the firm has too much debt.
AT&T expects to reduce its net debt by $4 billion. This will put its net debt to adjusted EBITDA at 3.0x. By 2025, it targets a 2.5x multiple.
Your Takeaway
Watch both stocks. They offer a high dividend yield because of the uncertain business outlook ahead.
