Enbridge and TC Energy have experienced upward trends over the past year, rebounding from significant declines caused by rising interest rates in Canada and the United States. Increased borrowing costs impacted profits and cash availability for distributions or debt reduction.
Following a shift in market sentiment from concerns over interest rate hikes to expectations of rate cuts, value investors began purchasing these TSX-listed stocks. Investors who missed the initial rebound are now considering whether ENB stock and TRP stock are still undervalued and suitable for inclusion in a self-directed portfolio focused on dividends and total returns.
Enbridge is currently trading near $55.50, up approximately 15% year-to-date, with a trailing 12-month price-to-earnings (P/E) multiple around 21. The company has been expanding through strategic acquisitions and internal projects, including the finalization of a significant purchase of three natural gas utilities in the United States, making it the largest natural gas utility operator in North America.
On the other hand, TC Energy is trading near $63, up 20% year-to-date, with a trailing P/E ratio close to 19. Despite challenges with cost overruns on the Coastal GasLink pipeline project, the company has managed to mitigate debt concerns through asset monetization and bond sales. The completion of Coastal GasLink is expected to benefit Canadian natural gas producers by providing access to a new LNG export facility in British Columbia.
Both companies have ongoing capital programs supporting growth in distributable cash flow and dividend increases in the 3-5% range over the next few years. Enbridge offers a dividend yield of 6.6%, with 29 consecutive years of payout increases, while TC Energy provides a dividend yield of 6% and has raised dividends for the past 24 years.
Considering Enbridge’s slightly higher dividend yield and lower volatility compared to TC Energy, investors seeking income may find it an attractive option. However, those looking for potentially greater upside potential in the medium term may favor TC Energy due to its lower valuation multiple. For a diversified approach, splitting investments between the two stocks could be a prudent strategy.
