Top Canadian Pipeline Stocks to Buy in April 2024

WRITTEN BY Dan Kent | UPDATED ON: March 22, 2024

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Pipeline companies in Canada, known for their consistent returns and dependable dividends, have become a favored investment choice among numerous investors. These corporations run pipelines that carry oil and gas nationwide, earning revenues from the usage fees for their infrastructure.

The Toronto Stock Exchange (TSX) is home to several pipeline companies that offer investors exposure to this sector.

One of the most significant advantages of investing in pipeline stocks is their ability to generate stable cash flows and not be as reliant on oil prices. These companies typically have long-term contracts with their customers, providing a predictable revenue stream.

Despite their benefits, pipeline stocks have faced some challenges in recent years. Environmental concerns and opposition to new pipeline projects have increased scrutiny and regulatory hurdles.

However, many pipeline companies have adapted to these challenges by investing in renewable energy and reducing their carbon footprint. As a result, pipeline stocks remain a viable investment option for those seeking a reliable source of income.

They offer attractive dividend yields for their shareholders, and many are Dividend Aristocrats.

The best Canadian pipeline stocks today

Enbridge (TSE:ENB)

Enbridge dividend

Enbridge (TSE:ENB) is North America's leading energy infrastructure company. The company operates the world's longest crude oil and liquids transportation system, over 17,000 miles. Enbridge has a diversified portfolio of assets, including natural gas pipelines, crude oil pipelines, and renewable energy projects. 

The company's strong financial position and stable cash flows have consistently made it a top pick for investors seeking reliable income.

Recently, the company made a significant acquisition to acquire many of Dominion Energy's natural gas assets. Although the addition looks promising, investors are concerned with debt levels as they approach $80B.

This will be an essential element to pay attention to regarding Enbridge stock. Shares slumped over the summer of 2023, eventually hitting a low that pushed the yield above 8%. Shares have recovered from those lows and still offer good value today, as well as a 7%+ dividend yield.

TC Energy (TSE:TRP)

TC Energy

TC Energy (TSE:TRP) is a North American energy infrastructure company that owns and operates a vast network of natural gas pipelines, storage facilities, and power generation assets.

The company's natural gas pipelines span over 57,000 miles across North America, making it one of the continent's largest natural gas transmission companies.

TC Energy is known for its stable cash flows and reliable dividend payments.

The company often hits its expected dividend growth guidance, and TC Energy stock is a popular holding in many Canadian income investors' portfolios.

The company has had rough patches over the last few years, mostly with operational issues regarding its pipeline developments and completed projects. It has also planned to split the business in two, with different companies focusing on other elements, one of which is primarily natural gas pipelines.

I'm unsure how I feel about this split, but only time will tell if it will be prudent. The company is yielding north of 7%, higher than historical averages due to the recent selloff in high debt load companies. It pays its quarterly dividend, as most pipeline companies have transitioned over the years.

Pembina Pipeline Corporation (TSE:PPL)

Pembina stock

Pembina Pipeline (TSE:PPL) is a Calgary-based energy infrastructure company that operates a diversified portfolio of assets, including natural gas pipelines, crude oil pipelines, and natural gas processing facilities.

The company's extensive network of pipelines spans over 10,000 miles across North America, making it a key player in the energy transportation industry.

No, Pembina Pipeline is not as big as a company like Enbridge.

This is why Pembina Pipeline stock often gets overlooked when investors are screening for high-income options.

However, the smaller players sometimes pack just as big of a punch. The company is well known for executing projects on time and budget. This starkly contrasts TC Energy, which has been mired in issues as of late with project development and completion.

The company is yielding in the high 5% range, which is slightly higher than normal. This is because investors are uncertain whether the higher rates that plagued pipelines in 2023 will continue in 2024 and beyond. Shares have recovered nicely from lows set back in October. 

However, at the time of writing, the payout ratio relative to the company's distributable cash flow seems well covered, making it one of the best energy stocks to own today.

Keyera (TSE:KEY)

Keyera Corp

Keyera (TSE:KEY) is a Calgary-based energy infrastructure company that operates a diverse portfolio of assets, including natural gas processing plants, crude oil storage facilities, and transportation pipelines.

The company's natural gas processing plants are located in key producing regions across Western Canada, providing it with a strategic advantage in the industry. It has the smallest network of pipelines out of any on this list at only around 4,000 km.

I like to think of Keyera as often the forgotten pipeline. It has a market cap of only $7.3B and is nowhere close to the size of the previous three. So, it often gets overlooked for blue-chip alternatives.

However, at the time of writing, the company is in strong financial shape. Although it's the lowest yielding on this list at the time of writing, north of 6%, it still provides solid income for investors. It also has a safe payout ratio of approximately 65%.

What are pipeline stocks?

Pipeline stocks are shares of companies that own and operate pipelines for transporting oil, gas, and other energy products. These companies generate revenue by charging fees for using their channels, which are essential for transporting energy products from production sites to refineries and distribution centers.

In Canada, pipeline stocks are traded on the Toronto Stock Exchange (TSX). They are an essential part of the energy sector. Some of the largest pipeline companies in North America are Canadian, including Enbridge, TC Energy, and Pembina Pipeline.

Importance of pipeline stocks in Canada

Canadian pipeline stocks are essential for several reasons. First, they play a crucial role in the Canadian economy by transporting energy products to domestic and international markets. We rely heavily on the oil and gas industry to drive our GDP.

Second, they allow investors to invest in a stable and profitable industry.

Pipelines and Canadian energy stocks are critical in Canada because of the country's large oil and gas reserves. Oil producers are very popular here (click here to see our post on the best Canadian oil stocks).

Dominant players like Canadian Natural Resources and Imperial Oil produce millions of barrels daily, fueling the global economy.

Investing in Canadian pipeline stocks can be an excellent way to diversify a portfolio and gain exposure to the energy sector. However, like all investments, pipeline stocks carry regulatory and environmental risks as we move toward a greener future.

Best Canadian pipeline ETF

Investing in individual pipeline stocks can be risky, but investing in a pipeline-focused exchange-traded fund can provide a more diversified approach.

For investors looking for a more targeted approach, there is the Horizons Canadian Midstream Oil & Gas Index ETF (HOG.TO). This ETF focuses specifically on midstream energy companies, including pipeline companies.

The ETF has a management fee of 0.74% and provides exposure to companies such as Enbridge, TC Energy, and Pembina Pipeline Corp.

A word of caution, however. HOG is a tiny ETF with assets under management of just over $30M. It is not a liquid ETF, and there are days when only a few hundred shares trade hands.

For overall exposure to the energy sector, you could check out the TSX Capped Energy Index ETF, which trades under the ticker XEG. It contains some of the best producers on the planet, such as Suncor Energy, Canadian Natural Resources, Tourmaline Oil, Imperial Oil, and much more.

Who is the largest pipeline company in Canada?

Enbridge Inc. is the largest pipeline company in Canada. It operates a sprawling pipeline network spanning more than 17,000 miles (27,000 kilometres) across North America.

Although TC Energy's overall pipeline network is larger in terms of total kilometres, Enbridge is nearly twice the size on a market capitalization basis.

Enbridge was founded in 1949 and has since become one of North America's largest energy infrastructure companies. The company's pipeline transports more than three million barrels of crude oil and natural gas liquids daily.

Enbridge's pipeline network is divided into two main segments: liquid pipelines and gas pipelines. The liquids pipeline segment includes pipelines transporting crude oil, natural gas liquids, and refined petroleum products across North America.

The gas pipeline segment includes pipelines transporting natural gas across Canada and the United States.

In addition to its pipeline network, Enbridge also owns and operates several other energy infrastructure assets, including natural gas processing plants, storage facilities, and renewable energy projects.

What are the largest pipelines in the US?

Now that we've discussed the best pipeline stocks in Canada, you may be wondering about some of the largest pipelines in the United States and whether these Canadian companies operate them.

When it comes to the largest pipelines in the US, several come to mind. These pipelines transport vast amounts of oil and natural gas across the country. Here are some of the largest pipelines in the US. Keep in mind, they're in no particular length.

Trans-Alaska Pipeline System (TAPS)

The Trans-Alaska Pipeline System (TAPS) is one of the largest pipelines in the US. It stretches 800 miles from Prudhoe Bay on Alaska's North Slope to the port of Valdez on the southern coast. The pipeline was completed in 1977 and has since transported over 17 billion barrels of oil.

Colonial Pipeline

The Colonial Pipeline is the largest refined products pipeline in the US, stretching over 5,500 miles from Texas to New York. The pipeline transports gasoline, diesel fuel, and jet fuel to various markets in the eastern and southern United States.

Keystone Pipeline

The Keystone Pipeline is a pipeline system that transports oil from Canada to the US and is approximately 2,687 miles long. The pipeline has two phases, with the first phase stretching from Hardisty, Alberta, to Steele City, Nebraska, and the second phase stretching from Cushing, Oklahoma, to Nederland, Texas.

Explorer Pipeline

The Explorer Pipeline is a 1,830-mile pipeline that transports gasoline, diesel fuel, and jet fuel from the Gulf Coast to the Midwest. The pipeline has a capacity of 660,000 barrels per day and serves markets in Texas, Oklahoma, Kansas, Missouri, Illinois, and Indiana.

Enbridge Mainline

The Enbridge Mainline is a system of pipelines that transports crude oil from western Canada to the US Midwest and Gulf Coast. It is, in total, over 5300 km in length. The pipeline system consists of several pipelines, including Line 3, Line 4, and Line 67, which collectively have a capacity of over 3 million barrels per day.

Overall, these pipelines play a crucial role in the transportation of oil and natural gas across the US, helping to power the country's economy and meet the energy needs of its citizens.