Enbridge (TSX:ENB) and Canadian Natural Resources (TSX:CNQ) are some of Canada’s largest energy stocks and some of its largest companies. These are internationally recognized companies.
Both pay attractive, growing dividends. Both are market leaders. However, which one looks better from a valuation perspective and which dividend looks more appealing today? We’ll answer that below.
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Enbridge: An infrastructure behemoth
With a market cap of $171 billion, Enbridge is the larger of the two stocks. Enbridge is also a far more diversified business. Enbridge has a massive liquids and gas pipeline/transport business.
It also happens to be North America’s largest natural gas distribution utility with over 7 million customers. Its last substantial segment is renewable power, where it produces 4.1 gigawatts of power in Europe.
Around 98% of Enbridge’s business is either contracted or regulated. Consequently, it has very little direct commodity risk. The company’s stable income profile has allowed it to take on a fair amount of debt. It sits on around $109 billion of debt! Its debt-to-earnings before interest, tax, depreciation, and amortization (EBITDA) ratio is close to five.
This is probably one of the largest concerns an investor should have with Enbridge. Interest rates have been stable in 2026. Right now, it can safely service its debt while paying a growing dividend. However, if interest rates rise, it is highly susceptible to a stock downrating over concerns that the debt service could start to pinch on profits and cash flow. We saw this in 2023 when its stock declined by 22%.
Enbridge does have a 31-year record of consecutively increasing its dividend. Since 2019, its dividend has risen by a 4% compounded annual growth rate (CAGR). It yields 5% today. While its dividend is safe in the current environment, many investors are concerned that it is not sustained entirely by earnings.
Rather, Enbridge keeps rolling and refinancing debt (rather than paying down debt), which helps support its generous dividend payout. As an investor, you will want to closely monitor this. Enbridge may be more sensitive to monetary policy than you might think.
Canadian Natural Resources: A dividend growth play
With a $131 billion market cap, Canadian Natural Resources is Canada’s largest energy producer. Across oilsands, thermal, and conventional energy plays, Canadian Natural produces 1.6 million barrels of oil equivalent (BOE) per day. Most of its production comes from Western Canada.
Canadian Natural is a much simpler story. It produces oil and natural gas, and it does that very efficiently and cost-effectively. It can sustain operations and its dividend for around $40 per barrel.
Any price it captures above $40 per barrel funds production growth, acquisitions, debt reduction, share buybacks, and dividend increases/special dividends. With a low decline rate and 30 years of proven reserves, Canadian Natural can generate very powerful cash flow.
Canadian Natural is printing money at today’s energy prices. With about $16 billion of net debt, it is only sitting with about 1.7 times debt-to-EBITDA. When it hits $13 billion of net debt, it plans to return 100% of its excess cash to shareholders. Given strong expected cash flows in 2026, it won’t be far from that level by year-end.
Canadian Natural has a 25-year history of consecutively increasing its dividend. After strong stock performance, it only yields 4% today (which is smaller than Enbridge’s yield).
The Foolish takeaway
Enbridge is an infrastructure behemoth with only modest commodity exposure. However, its elevated debt could put its dividend at risk one day. Canadian Natural, on the other hand, is exposed to volatile energy prices. Sometimes that can be a benefit and other times a detraction.
However, its dividend is widely sustained, even if oil prices were to drop significantly. With a strong (and improving balance sheet), Canadian Natural would be my preferred bet for a growing stream of dividends in the future.
