Canada’s two cross-border pipeline companies are near 52-week highs, boosted by strong financial results and Donald Trump’s election victory.
Mr. Trump’s pro-hydrocarbon stance is good news for the North American energy sector. During his first term, he approved the construction of the cross-border section of TC Energy’s Keystone XL pipeline, only to have it revoked by Joe Biden on the first day he took office. Alberta Premier Danielle Smith said last week that Mr. Trump’s re-election might revive the project.
The President-elect has repeatedly referred to oil as “liquid gold” and claims the U.S. has more of it that any other country. That’s far from the truth – according to WorldAtlas.com, the U.S. has 55.25 billion barrels of oil reserves, far behind Venezuela’s 303.22 billion barrels and Saudi Arabia’s 267.19 billion. But add Canada’s 163.63 billion barrels (including the oil sands) to the U.S. total and the combination ranks third. This might make a continental energy policy more appealing to the new Trump administration.
Although the price for oil was little changed after the election results were confirmed, conventional energy stocks moved higher. Conversely, green energy securities were hit. The BMO Clean Energy Index ETF (ZCLN-T) was down 6.75 per cent in the three days following the election.
Here’s a look at the latest results from the two pipeline giants. Both are recommendations of my Internet Wealth Builder newsletter.
Enbridge Ltd. (ENB-T)
Originally recommended on Aug. 22, 1999 at $8 (split-adjusted). Closed Friday at $58.93.
Background: Enbridge Inc. is one of the largest energy infrastructure companies in North America. It operates an extensive network of crude oil, liquids, and natural gas pipelines and is also involved in regulated natural gas distribution utilities and renewable power generation.
Performance: After a dip in June, the shares have been moving up and Monday reached a new 52-week high of $59.69.
Recent developments: On Nov. 1, the company released third quarter results that beat analysts’ expectations. GAAP earnings were $1.3 billion ($0.59 per share), compared with $500 million ($0.26 per share) in the same period of 2023. Distributable cash flow was $2.6 billion, in line with last year.
For the first nine months of the 2024 fiscal year, Enbridge reported earnings of $4.56 billion ($2.12 per share), up from $4.11 billion ($2.02 per share) in 2023.
Acquisitions: During the quarter, the company concluded the purchase of three U.S. natural gas utilities, first announced in September 2023.
“The assets are a perfect fit within Enbridge’s existing low-risk business model, offer reliable cash flow, and come with embedded quick-cycle growth opportunities,” said CEO Greg Ebel. “I am very proud of our team’s commitment to execution and ongoing integration efforts and look forward to working with our new colleagues and stakeholders to deliver safe, reliable, affordable energy to over 7 million Gas Distribution customers in North America.”
Dividend: Enbridge pays a quarterly dividend of $0.915 ($3.66 a year) to yield 6.2 per cent.
Outlook: The company is doing well, and the Trump victory looks promising for continued growth.
TC Energy (TRP-T)
Originally recommended on April 23, 2006 at $34.07. Closed Friday at $67.82.
Background: TC Energy is one of North America’s major pipeline companies, with 93,300 km of natural gas pipelines. It also owns or has interests in seven power generation facilities with combined capacity of approximately 4,300 megawatts.
Performance: The stock reached a 52-week high of $68.83 on Thursday before pulling back in Friday trading.
Recent developments: The company reported its first results after splitting itself into two parts. TC Energy retains the natural gas infrastructure and various power-generating facilities such as its stake in the Bruce Power nuclear plant. The spin-off company, South Bow Corp. (SOBO-T), inherits the company’s liquids pipeline assets. That would include Keystone XL if it’s revived.
TRP announced third quarter comparable earnings of $1.1 billion ($1.03 per share) compared to $1 billion ($1 per share) in 2023. Net income attributable to common shares was $1.5 billion ($1.40 per share) compared to a net loss of $200 million (-$0.19 per share) in the third quarter 2023.
Comparable EBITDA was $2.8 billion compared to $2.6 billion in 2023.
South Bow shares: TRP investors received one South Bow share for every five TC Energy shares owned. So, 100 TRP shares produced 20 shares of South Bow. The South Bow shares closed Friday at $32.86 on the TSX.
Dividend: TRP’s latest dividend (Sept. 27) was $0.96 per share. The next (payable Jan. 31) will be $0.8225 per share, reflecting the South Bow spin off.
Outlook: Positive, for the same reasons as Enbridge.
We rate both these stocks as buys for above-average cash flow and capital gains potential.
Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.
Editor’s note: This version clarifies that the next dividend payout at TC Energy will drop because of its recent spin off
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