TC Energy (TSX:TRP) and Enbridge (TSX:ENB) have enjoyed strong rallies over the past two years, recovering from an extended pullback that saw the stocks drop considerably when interest rates rose in Canada and the United States.
Investors who missed the rebound are wondering if TRP stock or ENB stock is still attractive and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and long-term total returns.
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TC Energy
TC Energy spun out its oil pipelines division into a new company last year as part of its shift to focus more on natural gas transmission and power generation. The move also enabled TC Energy to raise capital to strengthen its balance sheet.
TC Energy had to take on extra debt to complete its Coastal GasLink pipeline that now carries natural gas from producers in Western Canada to the new LNG Canada export facility. The final cost of the pipeline came in around $14.5 billion, which was more than double the initial budget. In addition to the spin off of the oil pipeline division, TC Energy monetized other non-core assets to reduce debt.
These efforts have enabled the company to pursue the rest of the capital program, expected to be $6 billion to $7 billion per year over the medium term. TC Energy completed its Southeast Gateway pipeline project in Mexico this year. That one came in 13% below budget. In total, TC Energy expects to put $8.5 billion in new assets into service in 2025.
Revenue from the new projects will help drive cash flow growth in the coming years to support ongoing dividend increases. TC Energy raised the dividend in each of the past 25 years. Investors who buy TRP stock at the current level can get a dividend yield of 4.5%.
Domestic and international demand for natural gas is expected to grow as new gas-fired power generation facilities are built to supply electricity to AI data centres.
Enbridge
Enbridge is Canada’s largest energy infrastructure company with a current market capitalization of $146 billion. The growth strategy in recent years has focused on diversifying the asset base with acquisitions and investments in energy export terminals, natural gas utilities, and renewable energy.
Enbridge purchased an oil export terminal in Texas. It is also a partner on the Woodfibre LNG export facility being built on the coast of British Columbia. In addition, Enbridge spent US$14 billion in 2024 to buy three natural gas utilities in the United States. These all complement the existing core oil and natural gas transmission networks that already move roughly 30% of the oil produced in Canada and the United States and a fifth of the natural gas used by American homes and businesses.
On the renewables side, Enbridge previously bulked up the wind and solar development division, which has assets in North American and Europe.
Enbridge is working on a $35 billion capital program through 2030 that will drive steady growth in distributable cash flow to support ongoing dividend increases. The board raised the dividend in each of the past 30 years. Investors can get a 5.7% dividend yield at the time of writing.
Is one a better pick?
TC Energy and Enbridge are both positioned well to benefit from rising energy demand in the coming years. Dividend growth will likely be similar at the two companies. With that though in mind, income investors should probably make Enbridge the first pick for its higher yield.
TC Energy, however, might have more upside potential, so those seeking long-term total returns could decide to go with TRP as the top pick.
At their current price points, I would probably split a new investment between the two stocks.
