Pipeline Stock Face-Off: Is Enbridge or Oneok the Better Buy Right Now?

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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A head-to-head matchup

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:

Data source: Enbridge and Oneok.

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.

A look at what they have coming down the pipeline

These pipeline companies should have plenty of fuel to continue increasing their high-yielding dividends. They're each investing in organic expansion projects that should come online in the coming years and supply incremental sources of stable cash flow.

Oneok is investing about $1 billion into two JVs with MLPX (the other is building a pipeline to support the LPG export terminal). Additionally, the company is a partner in the JV building the Eiger Express Pipeline (Enbridge is also a partner). This gas pipeline should enter service in mid-2028. Oneok also has a couple of smaller projects it expects to complete over the next year (the Medford Fractionator rebuild and the Bighorn processing plant). The company also sees future opportunities to expand its gas pipeline systems to support growing power demand by AI data centers. These projects support its plans to increase its high-yielding dividend by 3% to 4% per year.

Meanwhile, Enbridge has an even larger backlog of commercially secured growth capital projects. The company has secured 37 billion Canadian dollars ($26.5 billion) in projects it expects to enter commercial service through 2030. Meanwhile, it's pursuing another CA$50 billion ($37.8 billion) of expansions it could approve through the end of the decade. Those investments include new and expanded oil and gas pipelines, utility growth projects, and new renewable power projects. This backlog supports Enbridge's expectation of growing its cash flow per share at a 5% annual rate after this year, providing the fuel to grow its dividend by up to 5% annually.

Enbridge is the better buy

While Oneok is a solid income investment, Enbridge could be even better in the future. It pays a higher-yielding dividend that could grow faster in the coming years (assuming a stable exchange rate). That could enable it to generate higher total returns. This higher-octane total return potential makes it the better buy right now.

Matt DiLallo has positions in Enbridge. The Motley Fool has positions in and recommends Enbridge. The Motley Fool recommends Oneok. The Motley Fool has a disclosure policy.