Pipeline Stock Face-Off: Is Enbridge or Oneok the Better Buy Right Now?
Written by Matt DiLallo for The Motley Fool -> Enbridge and Oneok both have higher dividend yields. They back their payouts with rock-solid financial profiles. Enbridge has a robust backlog of expansion projects. Pipeline companies can make great investments if you want a sta
Pipeline companies can make great investments if you want a stable income. Most pipeline companies own assets that operate under regulated revenue frameworks or long-term contracts. That gives them the steady cash flow to pay dividends and invest in growing their operations.
Enbridge (NYSE: ENB) and Oneok (NYSE: OKE) are two of the top pipeline stocks . Here's a look at which is the better buy right now.
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Enbridge and Oneok have two of the best dividend track records in the pipeline sector. Canada's Enbridge has paid dividends for over 70 years and has increased its payment for 31 consecutive years (in Canadian dollars). Meanwhile, Oneok has delivered more than 30 years of dividend stability and growth. While Oneok hasn't increased its payment every year during that period, it has grown its dividend by almost 100% over the past decade.
Both companies currently offer high-yielding payouts backed by rock-solid financial profiles:
While Enbridge has a higher leverage ratio, it still has a strong investment-grade credit rating. Further, it generates very stable cash flow, as regulated rate structures or take-or-pay contracts back more than 98% of its earnings. Enbridge also has a more diversified business model, including North America's largest gas utility franchise and a growing renewable energy platform.
Oneok has been increasingly diversifying its platform. The acquisition of Magellan Midstream a few years ago added refined products, crude oil, and export terminals to its business mix. Meanwhile, the company formed a joint venture (JV) with MPLX to build a $1.4 billion LPG export terminal, which should enter service in early 2028. Oneok has also been acquiring and developing more fee-based assets. As a result, three of its four business segments expect to generate 90% of their earnings from fee-based sources this year, with the fourth segment anticipated to generate 85% fee-based earnings.
Overall, both companies produce stable cash flows to cover their high-yielding dividends, which they further support with rock-solid financial profiles.
