When it comes to dividend-paying stocks on the TSX, Enbridge (TSX: ENB) has long been a household name. However, investors seeking a compelling alternative might want to consider Capital Power (TSX: CPX). Both companies offer attractive dividends, but a closer look reveals that CPX may have the edge for those seeking growth and stability.
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Into earnings
Enbridge stock recently reported its 2024 financial results, boasting a 13% increase in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to $18.6 billion and a 6% rise in distributable cash flow (DCF) to $12.0 billion. The company also announced its 30th consecutive annual dividend increase, raising the quarterly dividend by 3% to $0.9425 per share. While these figures are impressive, it’s worth noting that Enbridge stock’s growth is partly driven by acquisitions, such as the $19 billion purchase of three U.S. gas utilities.
Capital Power, meanwhile, has maintained a solid balance sheet with a total debt of $5.14 billion and a debt-to-equity ratio of 112.51%. The company’s prudent financial management and strategic investments in renewable energy projects have contributed to its robust performance. Investors will be keen to see if this trend continues.
Future outlook
Looking ahead, Enbridge stock has issued its 2025 financial guidance, projecting adjusted EBITDA between $19.4 billion and $20.0 billion and DCF per share between $5.50 and $5.90. The company also plans to deploy approximately $7 billion in capital in 2025, exclusive of maintenance capital. While these projections are positive, they rely heavily on the successful integration of recent acquisitions and the execution of planned projects.
Capital Power’s future outlook is equally promising, with a strong pipeline of renewable energy projects and a commitment to sustainable growth. The company’s strategic focus on clean energy aligns with global trends and positions it well to capitalize on the increasing demand for renewable energy. Investors will be watching for updates on project developments and financial performance.
The dividends
When comparing dividends, Enbridge stock’s forward annual dividend rate stands at $3.77, yielding approximately 6.10% at writing. Capital Power offers a forward annual dividend rate of $2.61, yielding around 5.14%. While Enbridge’s dividend yield is higher, investors should consider the sustainability of these payouts, especially given Enbridge’s higher debt levels and capital expenditure plans.
In terms of valuation, Enbridge’s trailing price-to-earnings (P/E) ratio is 26.41, while Capital Power’s is 9.85. This suggests that CPX may be undervalued relative to ENB, offering investors an opportunity to acquire shares at a more attractive price point. Furthermore, CPX’s focus on renewable energy could lead to higher growth prospects, potentially enhancing shareholder value over time.
Bottom line
While Enbridge stock remains a dominant player in the energy sector with a long history of dividend payments, Capital Power presents a compelling alternative for investors seeking growth and stability. CPX’s focus on renewable energy, solid financials, and attractive valuation make it a worthy consideration for those looking to diversify their dividend-paying holdings.
As always, investors should conduct their own due diligence and consider their individual financial goals and risk tolerance before making investment decisions. Both Enbridge and Capital Power have their merits, but for those prioritizing sustainable growth and a strong balance sheet, CPX may just edge out ENB in the current market landscape.
