Enbridge Is Solid, But This Stock Offers More Upside

In between dividends and capital appreciation lies the real crux of long-term investing. Speaking of dividends, Enbridge (TSX: ENB) has been running strong for decades, funding the retirement of many Canadians. Its 30-year dividend growth history and 6% average dividend yield are difficult to replicate for many stocks. In the last two years since Enbridge acquired the three US gas utilities, it has also been delivering capital appreciation. A 64% growth in share price between July 2024 and July 2026 reflects Canada’s infrastructure push and Enbridge’s accelerating gas pipeline projects.

Enbridge is a solid stock despite the dip

Enbridge’s stock has dipped 17% since the end of the second quarter after the company reported a 36% dip in net income in the second-quarter earnings. The stock fell further as its current CEO, Greg Ebel, retires on December 31, 2026, and Michele Harradence takes over. Harradence has led Enbridge’s gas transmission and distribution operations. Even though it is a well-planned succession, a management change tends to negatively affect the share price.

Moreover, Enbridge is raising $2.6 billion in equity capital to fund the acquisition of Tallgrass Energy’s crude oil transportation business for US$2.6 billion. This equity dilution and high leverage from a $41 billion capital expenditure come as Enbridge is expanding its energy infrastructure. Each of these projects will be accretive to its earnings per share and earn regular cash flow in the long term. However, they will strain its cash flow in the short term.

The piling debt could pull down the share price in the short term. Enbridge remains a solid buy-and-hold stock, especially after the dip, as dividend growth could accelerate post-2030 when under-construction projects come online.

But this stock offers more upside

While Enbridge is a good stock to own, debt has limited its upside. Canadian Natural Resources (TSX: CNQ) stock offers more upside, with its strong financial discipline and quick turnaround of acquired assets.

Canadian Natural Resources produces oil and gas and is sensitive to their prices. It is different from Enbridge. CNQ is in upstream operations and needs little capital expenditure. It acquires oil sands reserves, produces oil and gas, and sells them at market prices. When WTI prices rise, CNQ’s share price surges as it enjoys a low cost of production. Surplus cash generated from selling output is used to acquire new reserves and pay down debt.

While Enbridge’s cash flows are stable, those of Canadian Natural Resources are volatile. However, its dividends are secure at US$50 WTI as it includes the dividend amount in its breakeven price of mid-$40/barrel. Canadian Natural Resources’s medium-term target is to maintain net debt below $13 billion. Once it achieves this target, it will allocate 100% of free cash flow towards share buybacks.

This fast capital recycling of acquiring and paying off new reserves has driven Canadian Natural Resources’ share price up 353% since 2022. CNQ has also increased its annual dividend per share from $1 per share in 2021 to $2.50 in 2026. There is still more upside for CNQ, although it is trading near its all-time high of $72.

Enbridge vs. Canadian Natural Resources

Since 2021, the energy sector has been on an upcycle. If you invested $10,000 each in Enbridge and Canadian Natural Resources, your returns would be as follows.

Canadian Natural Resources outperformed Enbridge on both dividend and capital appreciation fronts because of its capital-efficient model and oil and gas upcycle. The geopolitical situation and the data centre boom have put natural gas at a sweet spot. Canada’s liquefied natural gas exports to countries other than the United States will help CNQ produce more and get a better price for its output, hinting that the uptrend will continue till the end of the decade.