South Bow, it seems, was born the old-fashioned way—spun off from TC Energy and tossed to the wolves.
It runs the Keystone pipeline, that steel umbilical cord between the frozen oil fields of Canada and the refineries that keep America humming. Try building that today. You’d need divine intervention and twelve lawyers per mile.
A million and a quarter barrels move through it each day, with storage for another seven million. Before it’s a business, it’s a backbone. Or perhaps the economic equivalent of a kidney: unnoticed until it fails.
The business won’t double. It might not grow at all. But pipelines are toll roads. They don’t sleep, and neither do the dividends. Better a boring income than an exciting loss.
The balance sheet is stretched to five times EBITDA. High, but par for the pipeline course.
After the spin, index funds and TC Energy shareholders dumped the stock. Classic spinoff behavior — sell first, ask questions later. The stock sank to $28.50 CAD, pushing the yield near 10%.
That’s fat, especially with rates drifting down again. Enbridge yields 6.6%. Kinder Morgan 5%. Both carry heavier debt loads than South Bow.
The whole thing reads like a textbook special situation. I bought the Canadian debut. The rerating should come once the forced selling ends.