Investing in pipeline companies can be quite appealing if you’re looking for a consistent income source. Most of these companies manage assets under regulated revenue structures or long-term contracts, which leads to reliable cash flow for dividends and business growth.
Enbridge (NYSE:ENB) and Oneok (NYSE:OKE) are two notable examples. Let’s explore which might be the better purchase right now.
Remember Nvidia back in 2009? An interesting signal is popping up again. Back then, a “double down” signal was identified for a less-known chip producer named Nvidia. Now, years later, a company significantly smaller than Nvidia is showing the same “full conviction” signal.
direct confrontation
Enbridge and Oneok are recognized for their solid dividend performance within the pipeline industry. Enbridge, based in Canada, has maintained dividends for more than 70 years and has raised them for 31 consecutive years (in Canadian dollars). Oneok also has a commendable record, offering steady dividends and growth for over 30 years, even though it hadn’t increased its dividend every single year. However, it has almost doubled its dividend over the last decade.
Both companies presently provide high-yield dividends supported by strong financial standings.
pipeline stock | dividend yield | leverage ratio | Dividend payout ratio |
|---|---|---|---|
Enbridge | 5% | 4.5x to 5.0x | 60%-70% |
Oneok | 4.7% | 3.5 times | 85% or less |
Data sources: Enbridge and Oneok.
While Enbridge shows a higher leverage ratio, it maintains a strong credit rating. The company benefits significantly from regulated fee structures that ensure over 98% of revenue, leading to highly stable cash flow. Enbridge also boasts a diversified business model, being the largest gas supplier in North America.
Oneok is broadening its scope as well. After acquiring Magellan Midstream, the company added refined products, crude oil, and export terminals to its portfolio. Furthermore, Oneok has formed a joint venture to develop a $1.4 billion LPG export terminal. This venture could result in three of its four business segments generating 90% of revenue on a fee basis this year, with the fourth segment following close behind.
Ultimately, both companies produce reliable cash flows that sustain their attractive dividends, backed by solid financial health.
What they bring to the pipeline
These companies are likely well-positioned to continue boosting their dividends. Each is engaging in organic growth projects that should start producing stable cash flow in the coming years.
For instance, Oneok is investing around $1 billion in two joint ventures. One is for a pipeline supporting an LPG export terminal. They are also working on the Eiger Express pipeline, which is set to come online in mid-2028. Additionally, Oneok has smaller projects due soon, which will aid its plans to increase dividends annually by 3% to 4%.
Meanwhile, Enbridge has a more extensive portfolio of secured growth capital projects. The company has earmarked C$37 billion (about $26.5 billion) for upcoming endeavors, with expectations for commercial service by 2030. They also have a C$50 billion (or $37.8 billion) expansion in the works, anticipated to be cleared by the end of 2020.
Enbridge shines
While investing in Oneok can yield good income, Enbridge might be the better option moving forward. It has a robust high-yield dividend and considerable growth potential if currency rates hold steady. Investing now could lead to higher returns overall.
Should you invest in Enbridge now?
Before making a decision on Enbridge stock, keep in mind the following:
Our analysts at Motley Fool Stock Advisor have spotlighted ten stocks they deem exceptional investments right now. Enbridge, interestingly, isn’t among them; instead, these ten stocks could deliver impressive returns in the near term.
Now, when we reflect on stocks like Netflix and Nvidia, which have shown remarkable returns since their recommendations were made, it’s worth considering how investments can play out over time.
The essential point to remember is that Stock Advisor boasts an average return of 935% — significantly outperforming the S&P 500, which stands at 206%. So, it’s definitely worth considering joining an investing community committed to retail investors.
*Stock Advisor returns are projected for June 13, 2026.
Disclosure: I have a stake in Enbridge, and the Motley Fool holds and recommends both Enbridge and Oneok.
