In response to the shifting dynamics of the energy market, North American oil and gas pipeline giants Enbridge (TSX:ENB) and TC Energy (TSX:TRP) are strategically realigning their operations to optimize their extensive energy infrastructure networks. These significant changes have caught the attention of the market, as investors anticipate capitalizing on the potential growth dividends. In addition, these two Canadian pipeline monopolies offer attractive dividend incomes for shareholders.
At the end of 2023, Enbridge announced a $14 billion acquisition of three natural gas utilities from Dominion Energy, a move that further expanded its natural gas distribution business. Similarly, TC Energy spun off its oil pipeline operation into a standalone company to enhance shareholder value.
For Canadian investors, Enbridge and TC Energy, two blue-chip TSX stocks, provide diversification and relatively lower overall investment risk.
Enbridge boasts a market capitalization of over $100 billion and operates in five key business segments: liquids pipelines, natural gas transmission, natural gas distribution and storage, renewable energy, and energy services. The company manages an extensive crude oil and natural gas pipeline network, runs North America’s largest natural gas utility, and continues to grow its renewable energy portfolio.
In the third quarter of 2024, Enbridge demonstrated solid operational momentum across its portfolio and projected its full-year EBITDA to approach the upper end of its guidance range. Notably, the company completed the acquisition of three U.S. natural gas utilities during this quarter and expanded its 2024 growth program by $7 billion. This includes approving a solar project and announcing the expansion of infrastructure in the Permian Basin. Enbridge’s near-term rate base annual growth is forecasted at 8%, driven by population growth, data center demand, and system modernization.
Enbridge’s stable cash flow and minimal sensitivity to commodity price fluctuations have allowed it to maintain its Dividend Aristocrat status, with 29 consecutive years of dividend growth. The annual dividend has increased from $0.26 per share in early 1997 to the current $3.77 per share, offering a dividend yield exceeding 6%.
Analysts forecast Enbridge’s adjusted earnings per share to rise from $2.78 in 2024 to $3.20 in 2026. With a trailing price-to-earnings ratio of 22x, the stock could reach approximately $72 by 2027.
TC Energy’s portfolio is primarily focused on natural gas infrastructure, with 90% of its 2025 comparable EBITDA expected to derive from natural gas pipelines. The company’s $28 billion capital program lays a solid foundation for future cash flow and earnings growth.
The majority of TC Energy’s earnings – 97% – stem from rate-regulated and long-term contracted assets. This strong base is projected to drive annual comparable EBITDA growth between 5% and 7% through 2027. Furthermore, TC Energy aims to maintain its debt-to-EBITDA ratio at an upper limit of 4.75x. Much of the expected growth will come from increasing natural gas demand, forecasted to reach approximately 160 billion cubic feet per day by 2035. One of the company’s key assets, the Bruce Power nuclear facility, remains strategically vital, with ongoing modernization projects and capacity expansions planned.
TC Energy distributes an annual dividend of $3.28 per share, with a forward dividend yield of 5% and a payout ratio of 55%. This dividend is considered safe, supported by analysts’ projections that its adjusted funds from operations (AFFO) per share will rise from $5.70 in 2024 to $6.12 in 2025. Additionally, TC Energy’s stock appears undervalued, priced at just 10.5x forward AFFO. Analysts anticipate that the stock will increase by over 5% in the next 12 months.
