Pipelines continue to be a sticky subject for oil investors. While some of the biggest names in the energy industry command impressive economic moats and dominate this sector of the TSX, their reliance on pipelines remains their Achilles’ heel. The knife cuts both ways, though, and two companies are a buy this week thanks to a well-timed pair of developments.
Keystone pipeline is back up and running
TC Energy (TSX:TRP)(NYSE:TRP) has resumed oil transport on the Keystone pipeline after getting the all-clear from the U.S. Pipeline And Hazardous Materials Safety Administration. It’s good news for the oil sector, though investors barely took notice of the Keystone event, with its stock fairly flat throughout.
Indeed, TC Energy is up almost 30% in the last 12 months overall and trades almost 40% higher than its 52-week low. The Keystone pipeline repair and restart will likely add to the stock’s overall upward momentum. Paying a tasty 4.5% dividend yield, TC Energy is a solid buy for an energy portfolio.
Keeping the crude moving is one of the prime objectives for oil businesses at the moment. Another is growth, since market share is still an all-important factor, even for behemoths such as Enbridge. While it’s unlikely that a pretender to the midstream throne could come any time soon, maintaining dominance at a time when few shipping options exist is key.
Mainline could be open for business again soon
Enbridge (TSX:ENB)(NYSE:ENB) is up by 3% so far this week. Positive noises with regards to pipeline developments are sending investors back into midstream companies, and that close to 6% yield is looking tastier than ever. For a combination of passive income and growth, Enbridge has long been held up as one of the star stocks of the TSX.
The midstream giant has gained 14.8% in the past year — a period that has seen the company face one hurdle after another in its pipeline business. Though its current price is around 25% above its 52-week low point, its yield is still rich enough for the most aspirational income investors. And now that Enbridge has applied to resume open season on its Mainline system, the stock could get another boost soon.
One of the reasons why Enbridge is still doing so well, despite holdups in the industry, is that its liquid pipelines business was strong during the third quarter, with cash flows better than expected. With the winter heating period underway and set to be a hard one, natural gas and other utilities will be able to turn in a good few months. For dividend growth in the long term, Enbridge stock is a strong pick.
The bottom line
Both Enbridge and TC Energy are long-term winners for wide-moat dividends. Enbridge’s rich 6% yield is worth locking in, while its stock is cheap. The company is still in a dominant position, with its Mainline network practically unassailable by competitors. While this may change once more oil shipping options come online, for now, Enbridge is one of the widest moats on the TSX and a solid buy for long-term oil bulls.
