Why Canada’s Top Pipeline Stocks Are Thriving and Still Offering Great Investment Opportunities

Canada's two major cross-border pipeline companies are reaching impressive heights, nearing 52-week peaks, thanks to robust financial performances and the political changes surrounding Donald Trump's recent election victory.

Trump's pro-oil policies during his first term significantly benefited the North American energy sector. He championed the Keystone XL pipeline, a project that faced cancellation by President Joe Biden right after taking office. With Trump now back in the political spotlight, Alberta Premier Danielle Smith has hinted that his re-election could breathe new life into this pivotal pipeline project.

Trump has dubbed oil as “liquid gold,” touting the U.S. as a leading oil producer. However, this claim is misleading. Current estimates place U.S. oil reserves at around 55.25 billion barrels, which pales in comparison to Venezuela’s 303.22 billion barrels and Saudi Arabia’s 267.19 billion. If we include Canada's reserves of 163.63 billion barrels, the combined North American figure climbs significantly, potentially laying the groundwork for a unified continental energy strategy under the Trump administration.

After the election, while oil prices remained steady, traditional energy stocks surged, contrasting sharply with a decline in renewable energy stocks. The BMO Clean Energy Index ETF, for instance, posted a 6.75% drop in the three days following the election results.

Spotlight on Enbridge Ltd. (ENB-T)

Originally recommended in 1999 at a mere $8 (split-adjusted), Enbridge shares closed last Friday at $58.93. This company stands as a titan in North America's energy infrastructure, managing an extensive network of crude oil, liquid, and natural gas pipelines while also participating in regulated natural gas distribution and renewable energy sectors.

The stock recently reached a new peak of $59.69 after a brief dip in June. Enbridge's third-quarter results released on November 1 surpassed analysts' projections, with GAAP earnings hitting $1.3 billion ($0.59 per share), a significant jump from $500 million ($0.26 per share) in the same period last year. This performance extended to the earlier months of the fiscal year, with earnings rising to $4.56 billion ($2.12 per share), up from $4.11 billion ($2.02 per share) the previous year.

In a strategic move, Enbridge recently acquired three U.S. natural gas utilities, enhancing its low-risk business model and providing consistent cash flows alongside expedited growth opportunities, according to CEO Greg Ebel. Enbridge also offers a quarterly dividend of $0.915, yielding 6.2% annually.

Insight into TC Energy (TRP-T)

TC Energy, initially recommended in 2006 with a share price of $34.07, closed last Friday at $67.82. The company is a key player in natural gas transportation, boasting 93,300 kilometers of pipeline and holding stakes in several power generation facilities.

It’s worth noting that TC Energy recently faced a transformation by splitting itself into two divisions: one focused on natural gas infrastructure and the other, South Bow Corp., managing the liquids pipeline assets, which could potentially include Keystone XL if revived. The company’s third-quarter results indicated remarkable growth, reporting comparable earnings of $1.1 billion ($1.03 per share), up from $1 billion ($1/share) in 2023, and net income ballooned to $1.5 billion ($1.40 per share).

Shareholders of TC Energy were rewarded with shares of the newly formed South Bow Corp based on their holdings, while South Bow stocks closed at $32.86 on the TSX last Friday. TC Energy pays a quarterly dividend of $0.96 ($3.84 annually) translating to a yield of 5.7%.

Investment Outlook

Both Enbridge and TC Energy show great potential for continued upward momentum, bolstered not only by their solid financial standings but also by the anticipated favorable regulatory landscape under Trump's potential policies. Investors should consider these stocks as strong buys for those looking for substantial cash flow and capital gains opportunities in the burgeoning energy market.

As North America's energy production landscape evolves, keeping an eye on these key pipeline players could yield rewarding results in the near future.