Midstream pipeline companies play a vital role in the energy value chain by transporting crude oil, natural gas, and natural gas liquids from upstream producers to downstream refiners through fee-based arrangements and long-term contracts. These predictable revenue streams support stable cash flows, providing companies with the financial flexibility to fund growth initiatives and reward shareholders through consistent dividend payments.
Against this backdrop, let’s compare Enbridge (TSX: ENB) and TC Energy (TSX: TRP) to determine which pipeline giant offers a more compelling investment opportunity right now.
Source: Getty Images
Enbridge
Enbridge is a leading Canadian midstream company that transports crude oil and natural gas across North America through long-term take-or-pay contracts and a tolling framework. Beyond its pipeline operations, the company also owns renewable energy assets with a combined generation capacity of 8.2 gigawatts and sells the electricity produced through long-term power purchase agreements (PPAs). Notably, approximately 98% of its EBITDA (earnings before interest, taxes, depreciation, and amortization) comes from regulated assets and long-term take-or-pay contracts, while 80% is indexed to inflation. This mix provides strong earnings stability and limits exposure to commodity price volatility and broader macroeconomic fluctuations.
Enbridge’s resilient business model has supported consistent financial performance and impressive long-term shareholder returns. Over the past 20 years, the company has generated returns of more than 810%, translating into an annualized return of 11.7%. It also has an exceptional dividend track record, having paid dividends since 1953 and increased its payouts annually for 31 consecutive years. Its current quarterly dividend of $0.97 per share translates into an attractive forward yield of approximately 5.66%.
Looking ahead, rising oil and natural gas production and consumption across North America could support demand for pipeline infrastructure. Capitalizing on these favourable industry trends, Enbridge is executing a $41 billion secured capital investment program, with several projects expected to enter service over the coming years. These investments could strengthen its earnings base and support long-term growth. Management expects distributable cash flow (DCF) per share and earnings per share (EPS) to grow at an annualized rate of 5% through 2030. Furthermore, the company plans to return between $40 billion and $45 billion to shareholders through 2030, reflecting confidence in its cash generation and ability to sustain dividend growth.
TC Energy
TC Energy is a leading North American energy infrastructure company that transports natural gas through an extensive 93,300-kilometre pipeline network, primarily under long-term take-or-pay contracts. It also operates seven power-generating facilities with a combined generation capacity of 4.3 gigawatts and sells most of the electricity produced through long-term PPAs. These long-term contractual arrangements provide predictable revenue streams and reliable cash flows, supporting consistent financial performance. Backed by its resilient business model, TC Energy has delivered total shareholder returns of more than 552% over the past 20 years, equivalent to an annualized return of 9.8%. The company also has an impressive dividend growth record, having increased its payouts for 26 consecutive years. TRP’s current forward dividend yield stands at approximately 4%.
Looking ahead, TC Energy is expanding its infrastructure network to capitalize on rising natural gas production and growing demand for reliable energy transportation across North America. The company placed $2 billion worth of projects into service during the first half of the year and remains on track to commission $3.5 billion of projects this year. Furthermore, it has an approximately $20 billion development pipeline, providing a solid foundation for future expansion. Supported by these investments, management expects adjusted EBITDA to reach between $12.6 billion and $13.1 billion by 2028, with the midpoint representing annualized growth of 5.3%.
Overall, TC Energy’s resilient business model, substantial development pipeline, and favourable long-term industry trends position it well to grow its earnings and cash flows while supporting sustainable dividend growth.
Investors’ takeaway
Despite delivering strong long-term shareholder returns, both Enbridge and TC Energy have faced recent share price pressure. Higher interest rates, margin pressures, and valuation concerns have weighed on investor sentiment, pushing both stocks below their 52-week highs. Enbridge has declined about 15% from its 52-week high, while TC Energy has corrected about 12.5%.
Following this pullback, Enbridge trades at 2 times analysts’ projected sales and 22.9 times estimated earnings. In comparison, TC Energy commands higher multiples of 5.6 times projected sales and 23.5 times estimated earnings. Although Enbridge has historically generated stronger shareholder returns and currently trades at a more attractive valuation, I believe TC Energy is the better investment opportunity at these levels. The ongoing regulatory and legal uncertainties surrounding Enbridge’s Line 5 pipeline could weigh on investor sentiment and create additional near-term risks. In contrast, TC Energy offers a relatively compelling opportunity for investors seeking both capital appreciation and steady dividend payouts.
