If I had to choose between Enbridge (TSX: ENB) and Suncor Energy (TSX: SU), picking just one would be a really tough decision for me. Both Canadian energy stocks can generate cash, and both give shareholders reasons to stick around. But I wouldn’t make the choice based on which stock I think oil prices will favour next. Instead, I’d ask a simpler question: which business would I rather own if energy markets become messy again?
In this article, I’ll compare the qualities of these two dividend stocks that matter most to me and explain why Enbridge would get my money over Suncor right now.
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Suncor has the momentum
Before explaining why Enbridge gets my vote, I want to make it clear that Suncor is not a stock I would want to bet against. This integrated energy company has been generating strong operational results, which has also helped its share price rally. At the time of writing, SU stock was trading at $90.49 per share with a market cap of $105.8 billion. Its shares have surged 62% over the last year and offer a 2.7% annualized dividend yield.
Suncor’s adjusted operating earnings in the second quarter jumped more than fourfold year-over-year (YoY) to $3.8 billion. Higher upstream price realizations and downstream margins drove the increase, partly offset by higher taxes and royalties. At the same time, its adjusted funds from operations nearly doubled YoY to $5.3 billion.
The company’s refinery throughput rose about 6% YoY to a second-quarter record of 470,600 barrels per day with the help of fewer maintenance activities.
These are some of the key reasons why Suncor stock has performed so well recently.
Why Enbridge gets my vote
While Suncor may be winning on recent share-price momentum, Enbridge offers the combination I would rather own when energy markets turn unpredictable.
If you don’t know it already, Enbridge owns a huge network of pipelines, natural gas transmission systems, and storage infrastructure. Currently, ENB stock offers a higher 5.6% annualized dividend yield.
Although Suncor has delivered much stronger recent earnings growth and stock returns, its upstream business remains more directly exposed to commodity prices. In contrast, Enbridge’s vast energy infrastructure network and long-term commercial arrangements give it greater cash flow visibility.
That strength and stability also showed up in Enbridge’s latest results. Its second-quarter adjusted EBITDA (earnings before interest, income taxes, depreciation, and amortization) climbed nearly 3% YoY to about $4.8 billion, mainly because of higher revenue tied to several rate cases. Similarly, cash provided by operating activities jumped about 27% from a year ago to $4.1 billion, while distributable cash flow rose roughly 2% to $2.9 billion.
Growth gives Enbridge the edge
A more reliable dividend with a higher yield is one of the biggest reasons I prefer Enbridge stock for the long term, but its expanding infrastructure footprint makes it even more appealing.
Enbridge ended the second quarter with a roughly $41 billion secured growth backlog and expects annual growth investment capacity of $10 billion to $11 billion. Some of its main projects include the US$1 billion Line 5 Relocation and the $4 billion Sunrise Expansion.
Recently, Enbridge agreed to acquire Salt Creek Midstream’s crude gathering business for US$600 million. The assets include about 500 miles of infrastructure in the Delaware Basin and are backed by long-term agreements with an average remaining contract life of roughly 10 years. Enbridge expects the deal to immediately add to distributable cash flow and earnings per share after closing.
So, Suncor certainly looks attractive with explosive cash flow growth and big share-price gains lately. But if I could own only one, I’d still choose Enbridge. Its 5.6% yield, diversified infrastructure network, long-term contracted assets, and $41 billion secured growth backlog give me the mix of dependable income and growth visibility I’d prefer when energy markets inevitably get bumpy.
