Enbridge vs. Energy Transfer: A Dividend Showdown

When it comes to ultra-high-yield dividend stocks, two midstream energy companies often stand out: Enbridge (ENB.TO) and Energy Transfer LP (ET). Both companies offer attractive yields, but which one is the better choice for income investors right now? Let's dive into their business models, growth prospects, valuations, and dividend histories to find out.

Business Models and Growth Prospects

Enbridge and Energy Transfer are both midstream energy companies with extensive pipeline networks in North America. However, there are key differences in their business models and growth prospects that influence their dividend yields and stability.

* Geographical Focus: Enbridge operates pipelines in both Canada and the U.S., while Energy Transfer's pipelines are only in the U.S. This geographical focus impacts their exposure to different markets and regulatory environments.
* Diversification: Enbridge is more diversified, ranking as the largest North American natural gas utility company due to acquisitions completed in 2023. This diversification can provide additional revenue streams and stability.
* Size and Financial Performance: Enbridge has a larger market cap (around $99 billion) compared to Energy Transfer's nearly $68 billion. Enbridge generated adjusted earnings of over CA$6 billion and distributable cash flow of almost CA$12 billion last year, while Energy Transfer's 2024 earnings and distributable cash flow were significantly lower.
* Growth Prospects: Enbridge projects adjusted EBITDA growth of nearly 17% in 2025, while Energy Transfer expects around 5% growth. These growth prospects can influence their ability to increase dividends over time.

Valuations

Based on the provided information, Energy Transfer's valuation appears more attractive than Enbridge's across various metrics.

* Forward Earnings Multiple: Enbridge (21.5x) vs. Energy Transfer (10.7x)
* Price-to-Sales Ratio: Enbridge (2.87x) vs. Energy Transfer (0.82x)
* Enterprise-Value-to-EBITDA: Enbridge (2.87x) vs. Energy Transfer (0.82x)

These metrics indicate that Energy Transfer is generally more attractively valued than Enbridge.



Dividend Yields and Stability

* Yields: Energy Transfer offers a higher forward distribution yield of 6.58% compared to Enbridge's 6.05% forward dividend yield.
* Dividend History: Enbridge has increased its dividend for an impressive 30 consecutive years, demonstrating stability and consistency. Energy Transfer, on the other hand, slashed its distribution in 2020 due to the pandemic but has since resumed growth.

Which Stock to Buy?

Both Enbridge and Energy Transfer are great picks for income investors. If you're looking for a higher yield and a more appealing valuation, Energy Transfer might be the better choice. However, if you prefer a more stable business and a longer dividend growth history, Enbridge could be more suitable for your portfolio.

Ultimately, the decision depends on your investment goals, risk tolerance, and time horizon. Both companies have their strengths and weaknesses, and it's essential to consider all factors before making an investment decision.