Better Buy: Enbridge vs. Pembina Pipeline Stock

Performance is improving among midstream energy companies. Let’s look at whether Enbridge or Pembina Pipeline would be a better buy right now.

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Amid the ongoing Russia-Ukraine war, several western countries have imposed sanctions on Russia. These restrictions are increasing the export of liquified natural gas and oil from North America to Europe. Growing exports have benefitted midstream energy companies by driving up their throughputs and financials. So, these companies have outperformed the broader equity markets this year.

In this favourable environment, let’s examine whether Enbridge (TSX:ENB) or Pembina Pipeline (TSX:PPL) would be a better buy right now.


Enbridge transports around 30% of crude oil produced in North America and 20% of natural gas consumed in the United States. Amid growing energy demand and solid execution, the company has posted impressive performance in the first nine months of this year. Its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) and adjusted EPS (earnings per share) rose by 12.7% and 4.8%, respectively.

Meanwhile, Enbridge secured another $8 billion in new projects last month, thus raising its secured capital backlog to $17 billion. These low-risk projects are underpinned by long-term take-or-pay commitments, providing stability to its financials. Further, the recent acquisition of Tri Global Energy has expanded its footprint in the North American renewable energy space, giving it 3 gigawatts of developmental projects. So, the company’s growth prospects look healthy.

The energy pipeline’s financial position looks solid, with liquidity of $8.1 billion as of September 30. Enbridge has an excellent track record of rewarding its shareholders through dividends. It has paid dividends uninterruptedly for the last 67 years. The company has also raised its dividends at an annualized rate of over 10% since 1995. Its dividend yield currently stands at a healthy 6.44%. Despite its solid underlying business, high dividend yield, and healthy growth prospects, ENB stock trades at an attractive NTM (next 12 months) price-to-sales multiple of 1.9.

Pembina Pipeline

Pembina Pipeline is an energy transportation and midstream company that is likewise delivering solid performance this year. Its revenue and adjusted EBITDA have grown by 27.9% and 14.5%, respectively, in the first nine months of this year owing to higher commodity prices and volume growth. After reporting its solid third-quarter performance, the company’s management has raised its EBITDA guidance for this year by $50 million to $3.625–$3.725 billion.

Meanwhile, Pembina Pipeline’s management expects to put around $900 million of projects into service this year. Besides, it has a solid pipeline of developmental projects worth $4 billion. Also, the company has formed a joint venture, Pembina Gas Infrastructure, with KKR by combining their western Canadian natural gas processing assets. The joint venture could drive growth while enhancing customer experience.

Notably, Pembina Pipeline today announced its guidance for 2023. The company’s management expects to make a capital investment of $730 million next year while generating an adjusted EBITDA of $3.5 billion to $3.8 billion.

Funded by solid cash flows, Pembina Pipeline’s management raised its monthly dividend by 3.6% to $0.2175/share last month. The company has grown or maintained its dividends since 1998. PPL’s forward yield currently stands at 5.7%. At today’s stock price, the NTM price-to-sales multiple currently stands at 2.6.

Bottom line

Although both Enbridge and Pembina Pipeline provide attractive buying opportunities, I favour Enbridge, given its solid track record, greater exposure to the U.S. market, and growing renewable asset portfolio.

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 and Pembina Pipeline. The Motley Fool has a disclosure policy. Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. 

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