The economy is uncertain. The market is uncertain. Politics are uncertain. In this environment, Canadian investors are looking for safe stocks to hold.
You don’t need a stock that will fly to the moon. Rather, stocks that will generally maintain their valuation, grow moderately, and pay a nice dividend are the ideal holding right now. If you want to be super cautious right now, Pembina Pipeline (TSX: PPL) and AltaGas (TSX: ALA) are two safe Canadian stocks to consider owning.
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A safe Canadian pipeline stock
Pembina Pipeline is a top energy infrastructure company in Canada. It operates collection and egress pipelines, midstream/processing facilities, storage complexes, and export terminals.
With Canada facing trade tensions with the United States, there is real openness to expand Canada’s energy infrastructure. This could create unexpected growth opportunities for Pembina.
It’s developing a major LNG export terminal on the coast of British Columbia. Already, the company has seen strong interest to contract this asset. This could pave the way for additional LNG expansion phases in the future.
In 2024, Pembina grew adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) by 14% to $4.4 billion. Adjusted cash flow from operations increased by 18.75% to $5.70 per share. All around, it was a great year for the company.
Pembina has a solid capital growth pipeline and strong record of development execution. It is projecting 4-6% growth in its contracted income in the years ahead. Opportunities to power data centres in Western Canada could bring new growth as well.
Pembina has one of the best balance sheets in the infrastructure industry. Net debt-to-EBITDA is around three times. That is very modest. The company pays an attractive 5% dividend today. It has been growing that dividend by a low single-digit rate over the past few years. Overall, Pembina is a great bet for income and modest capital returns.
A Canadian utility and midstream stock
AltaGas is a similar play to Pembina, but you get exposure to different factors. It owns and operates two businesses: a regulated gas utility in the United States and an energy processing business in Western Canada.
This company has been in turnaround mode for the past few years. The turnaround is almost complete. Today, around 90% of its adjusted EBITDA comes from long-term, contracted assets. It has strong counterparties, which limits the risk of customers not paying if the economy weakens.
Both its businesses are performing well in this current environment. Its utility business is seeing attractive, high single-digit growth as it modernizes its gas network. It still has levers to pull to expand its return on investment while growing its rate base.
Interest in diversifying Canada’s energy egress is creating great opportunities for its energy processing business. Asian demand for LNG and LPG is growing rapidly. AltaGas has export terminals to help meet this demand.
AltaGas’s balance sheet has drastically improved in the past few years. It has a net debt-to-EBITDA ratio of four. It pays a 3.3% dividend yield. Its dividend has been rising by about 6% per annum for the past few years.
The Foolish takeaway
These are both Canadian energy infrastructure stocks. They provide a safe investment opportunity during these uncertain times. Pembina pays a higher dividend, but AltaGas has been growing its dividend faster. Both are very well-managed and have solid balance sheets. Both stocks should provide solid total returns in the years ahead.
