Enbridge (TSX:ENB) and TC Energy (TSX:TRP) are giving back some gains after big runs in 2024. Investors who missed the rallies are wondering if ENB stock or TRP stock is now undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and total returns.
Enbridge
Enbridge trades near $59 per share at the time of writing compared to the 12-month high above $64 it reached a few weeks ago. The stock is still up about 27% in the past year.
Enbridge spent the past few years diversifying its asset portfolio through a series of acquisitions. The company purchased a renewable energy developer, an oil export terminal, and three natural gas utilities, all in the United States. Enbridge also holds a stake in the Woodfibre liquified natural gas (LNG) export facility being built in British Columbia.
The addition of the export assets positions Enbridge to benefit from anticipated demand growth for Canadian and U.S. oil and natural gas. In the domestic markets, Enbridge is a powerhouse in the energy transmission and distribution sector. The company’s transmission networks move about 30% of the oil produced in Canada and the United States and roughly 20% of the natural gas used by American homes and businesses. Adding the three natural gas utilities in a U$14 billion deal last year also made Enbridge the largest natural gas utility operator in North America.
On the development side, Enbridge is working through a $26 billion capital program across the asset portfolio. This should help boost cash flow in the next few years to support ongoing dividend increases. Enbridge raised the distribution in each of the past 30 years. Investors who buy the stock at the current level can get a dividend yield of 6.35%.
TC Energy
TC Energy spun off its oil pipelines business in 2024 in a move to focus more on natural gas storage and transmission. The company also has power generation assets.
This year will see two major pipeline projects ramp up commercial service. The 670-kilometre Coastal GasLink project is now moving natural gas from Canadian producers toward a new LNG facility in British Columbia. In Mexico, TC Energy reached mechanical completion last month on its 700-kilometre Southeast Gateway project and expects it to go into commercial service in May.
TC Energy has a number of other projects on the go that will see the company invest roughly $6 billion per year over the medium term. The board just increased the dividend by 3.3% for 2025. Investors who buy the stock at the current level can get a dividend yield of 5.4%.
TC Energy trades near $63 at the time of writing. The stock was as high as $70 in November.
Is one a better pick?
Enbridge has a more diversified asset base and offers a higher dividend yield. Income investors should probably go with ENB stock as the first pick at these levels. TC Energy, however, potentially has more upside torque on a rebound. I would probably split a new investment between the two stocks today.
