Income investors are making a notable comeback to certain energy stocks — and the reasons are somewhat straightforward. A combination of attractive dividends, improving fundamentals, and shifting interest rate dynamics are pulling investors back into certain Canadian energy stocks.
Let’s take a closer look at two obvious names: Enbridge (TSX:ENB) and Whitecap Resources (TSX:WCP), and why they’re turning heads in today’s income-hungry market.
Enbridge: A reliable dividend giant roars back
In the past year, Enbridge has staged an impressive comeback. The stock has gained 23%, and when dividends are factored in, the total return hits just over 30%. That’s enough to turn a $10,000 investment into approximately $13,000 — not bad for a slow-and-steady pipeline stock.
Interestingly, if you strip away the dividend, the stock’s return would have slightly underperformed the broader Canadian market, as measured by the iShares S&P/TSX 60 Index ETF. This highlights a key advantage of income investing: dividends can significantly boost total returns, especially in sideways or uncertain markets.
Enbridge wasn’t always this hot. From early 2022 through late 2023, the stock lagged for two key reasons:
- Slowing distributable cash flow per share (DCFPS) growth, hovering around 3% annually.
- A rising interest rate environment that made bonds and guaranteed investment certificates (GICs) more attractive to income-seeking investors.
As interest rates climbed, Enbridge shares slumped nearly 13%, bottoming around $38 in late 2023. But with a jaw-dropping 9% dividend yield at that level, the stock caught the attention of contrarian income investors. Their bet paid off — and fast.
By early 2024, as the Bank of Canada pivoted toward rate cuts (from 5% to 2.75% by early 2025), fixed-income instruments lost their shine. That drove more investors back into high-yielding, blue-chip stocks like Enbridge. Since early 2024, the stock has surged over 50%.
Today, Enbridge trades around $67.50, offering a still-attractive dividend and projected DCFPS growth of 3% annually through 2026, with potential for 5% beyond. Investors should be more conservative with their expectations for ENB returns going forward. Total returns may be around 8—10% annually, making it a reasonable blue-chip option for long-term income portfolios.
Whitecap Resources: A high-yield play with room to run
While Enbridge offers better stability, Whitecap Resources adds a dose of growth potential — and volatility.
After tumbling over 30% in early 2025 due to U.S. tariff headlines, Whitecap staged a sharp rebound, aided by strong second-quarter results:
- Production rose 5% to 292,754 barrels of oil equivalent per day
- Petroleum and natural gas revenue jumped 39%
- Funds flow per share climbed 5.6% to $0.75
- Free funds flow hit an impressive $304 million
At a current share price of $10.49, Whitecap yields nearly 7% — a compelling figure for income investors willing to accept commodity-driven fluctuations. Analysts also see nearly 25% upside based on consensus price targets, presenting a rare opportunity for both yield and capital appreciation.
Investor takeaway
With lower interest rates and fixed-income yields shrinking, and dividend-paying energy stocks regaining momentum, it’s no surprise that income investors are returning to the sector. Companies like Enbridge offer reliable income, while names like Whitecap deliver higher risk-reward potential.
For income-focused investors looking to diversify beyond bonds and GICs and are willing to take on greater risk, Canadian energy stocks with solid fundamentals and safe dividends are worth a closer look.
