Best Stock to Buy Right Now: Enbridge vs TC Energy?

Enbridge and TC Energy rebounded nicely over the past year. Are more gains on the way?

| More on:
golden sunset in crude oil refinery with pipeline system

Source: Getty Images

Enbridge (TSX:ENB) and TC Energy (TSX:TRP) have enjoyed big rallies over the past year. Investors who missed the surge are wondering which Canadian energy infrastructure stock might still be undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio.

Enbridge

Enbridge trades near $56.00 at the time of writing. The stock is up about 27% in the past 12 months and is just shy of the $59 it reached in 2022 before rising interest rates triggered the extended pullback.

Bargain hunters started to buy the stock last fall when sentiment shifted from fears of more interest rate hikes to expectations for rate cuts in Canada and the United States in 2024. Now that the central banks have started reducing interest rates, Enbridge should see borrowing costs decline next year. This frees up more cash that can be used for distributions or reducing the debt load.

Enbridge continues to grow through acquisitions and development projects. In recent years, the management team diversified the asset base to complement the core oil and natural gas transmission networks. Enbridge shifted its focus to exports, renewable energy, and natural gas utilities through the purchases of an oil export terminal in Texas, an American wind and solar developer, and the recent acquisition of three natural gas utilities in the United States.

The expansion of the asset base provides better stability for revenue and cash flow generation and positions Enbridge to benefit from global demand for North American oil and gas while also getting a slice of the transition to renewables.

Enbridge raised the dividend in each of the past 29 years. Investors who buy ENB stock at the current level can get a dividend yield of 6.5%.

TC Energy

TC Energy trades near $65 at the time of writing. The stock is up $36% in the past year, but still trades below the $74 it hit in June 2022.

As with Enbridge, the decline through the back half of 2022 and most of last year was largely driven by rising interest rates. In addition, TC Energy ran into expensive delays and rising construction costs on a major project. The 670-km Coastal GasLink pipeline saw its budget more than double to about $14.5 billion. This forced TC Energy to take on extra debt to get the project across the finish line. Coastal GasLink reached mechanical completion in late 2023 and is expected to go into commercial operation in 2025.

Management has done a good job of monetizing non-core assets to shore up the balance sheet. In addition, TC Energy recently completed the spin-off of its oil pipeline operations into a separate company.

Ongoing capital investments are expected to be around $6 billion per year over the medium term. This should provide ongoing support for continued dividend hikes. TC Energy raised the distribution in each of the past 24 years. Investors who buy TRP stock at the current level can get a dividend yield of 5.9%.

Is one a better pick?

Enbridge and TC Energy pay attractive dividends that should continue to grow at a similar pace. Investors seeking the highest yield for a portfolio focused on passive income might decide to go with Enbridge as the first choice. TC Energy, however, likely has more upside potential over the next couple of years and could deliver better total returns.

Both stocks are due for a pullback after their stellar runs, so better entry points could be on the way. That being said, dividend investors with cash to invest right now might want to split an investment between the two stocks and look to add to the positions on weakness.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker has no position in any stock mentioned.

More on Dividend Stocks

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »

senior man and woman stretch their legs on yoga mats outside
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold Forever

Here are 2 TFSA-worthy Canadian stocks. Which one is a good buy for your TFSA today?

Read more »

calculate and analyze stock
Dividend Stocks

This 5.5% Dividend Stock Pays Cash Every Single Month!

This REIT may offer monthly dividends, but don't forget about the potential returns in the growth industry its involved with.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How to Use Your TFSA to Earn up to $6,000 Per Year in Tax-Free Passive Income

A high return doesn't mean you have to make a high investment -- or a risky one -- especially with…

Read more »

path road success business
Dividend Stocks

2 High-Yield Dividend Stocks to Buy Hand Over Fist and 1 to Avoid

High yields are great and all, but only if returns come with them. And while two of these might, another…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 7% Dividend Stock Pays Cash Every Month

A high dividend yield isn't everything. But when it pays out each month and offers this stability, it's worth considering!

Read more »

young people stare at smartphones
Dividend Stocks

GST/HST “Vacation”: Everything Canadians Need to Know

The GST/HST "vacation" is a little treat for the holidays, along with a $250 payment. What should you do with…

Read more »

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »