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Midstream energy stocks have been anything but middling performers recently. Just look at Enbridge (NYSE: ENB) and Energy Transfer LP (NYSE: ET). These two leading midstream stocks have soared 33% and 42%, respectively, over the last 12 months.
Just because one has been a bigger winner in the past doesn't necessarily mean it will remain on top, though. Is Enbridge a better ultra-high-yield dividend stock to buy right now than Energy Transfer? Here's how the two stocks compare.
The underlying businesses
Enbridge's and Energy Transfer's business models are similar in several ways. They both have extensive pipeline networks in North America.
Probably the main differentiator with their midstream operations is that Enbridge's pipelines are in Canada and the U.S., while Energy Transfer's pipelines are only in the U.S. That's understandable since Enbridge is a Canadian company, whereas Energy Transfer is based in the U.S.
Another key difference between the two companies is that Enbridge is more diversified. Thanks to acquisitions completed in 2023, it now ranks as the largest North American natural gas utility company.
Perhaps the most important overall way these businesses differ is in size. Enbridge's market cap is around $99 billion. The company generated adjusted earnings of over 6 billion in Canadian dollars and distributable cash flow of almost CA$12 billion last year.
Energy Transfer's market cap of nearly $68 billion is significantly lower. So are the midstream operator's 2024 earnings of $1.08 billion and distributable cash flow of $1.98 billion.
Their growth prospects
Enbridge projects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) between CA$19.4 billion and CA$20 billion in 2025. This reflects year-over-year growth of nearly 17% at the midpoint of the range.
Energy Transfer expects adjusted EBITDA between $16.1 billion and $16.5 billion this year. The midpoint of this guidance range reflects a year-over-year increase of around 5%.
Could potential tariffs on Canadian imports to the U.S. impact Enbridge's business? Perhaps, but I don't think the effects will be significant. Over the longer term, the growth prospects for these two companies should be similar because they face many of the same industry dynamics and opportunities.
Dividends
Both Enbridge and Energy Transfer offer especially juicy dividends/distributions. However, Enbridge's forward dividend yield of 6.05% is lower than Energy Transfer's forward distribution yield of 6.58%.