Enbridge (NYSE:ENB) and Williams Companies (NYSE:WMB) have both sold off by about 18% this year. That slump has pushed the dividend yields of these pipeline giants even higher, with Enbridge's currently around 6.3% while Williams Companies' payout is roughly 5.4%.

For some investors, Enbridge's higher yield alone would tilt the scale in its favor as the better buy. However, it's vital that income-seekers drill down a lot deeper than a stock's current yield before adding it to their portfolio. Here's a closer look at the metrics that matter, which, in the end, still have Enbridge coming out ahead.

A person checking virtual check boxes.

Enbridge checks all the boxes to make it a better buy. Image source: Getty Images.

A closer look at their financial profiles

A high-yield dividend is worthless unless the company can sustain that payout over the long term. Three factors increase the probability that a company can maintain its dividend in good times and bad: the stability of its cash flow, comfortable dividend coverage, and the strength of its balance sheet. Here's how these two pipeline giants stack up:


Credit Rating

Debt-to-Adjusted EBITDA

Projected 2018 Dividend Coverage Level

% of cash flow fee-based or regulated



4.7 times

1.6 times


Williams Companies


5 times

1.6 times


Data source: Enbridge and Williams Companies.

As that table shows, both companies have remarkably similar financial profiles. They each generate very stable and predictable cash flow, since more than 96% of it comes from fee-based contracts or other steady sources. Meanwhile, both companies have conservative dividend coverage levels. Finally, each has strong, investment-grade balance sheets, though Enbridge has a bit of an edge here since it has a slightly higher credit rating and a lower leverage ratio after selling more assets than expected this year. Further, Enbridge expects leverage to improve closer to four times by 2020, comfortably below its five times target, while Williams sees leverage declining to about 4.75 times next year.

Comparing their growth prospects

Enbridge currently expects to place 7 billion Canadian dollars ($5.2 billion) of growth projects into service by the end of this year and a total of CA$22 billion ($16.5 billion) by 2020. Those expansions position the Canadian pipeline giant to grow cash flow per share at a 10% compound annual growth rate through 2020, which should support a similar growth rate in the company's high-yield dividend.

Williams Companies, meanwhile, expects to place $5.2 billion of growth projects into service through 2021. Those expansions should support 10% annual profit growth through next year and 5% to 7% annual earnings growth beyond 2019. That will enable Williams Companies to increase its dividend by 10% to 15% next year, with a more moderate pace likely starting in 2020, though the company does have a large supply of expansion projects in development, which could give it the fuel to grow its payout at a faster pace.

Given the current forecasts of both companies, Enbridge is on track to grow earnings and its dividend at a faster pace than Williams, which gives it the edge in this category.

Considering their valuations

The final factor investors should evaluate before buying a stock is its valuation. Enbridge currently sells for 10.2 times anticipated 2018 cash flow and about 9.3 times the cash flow it expects to produce in 2019. Williams Companies, meanwhile, sells for about 11.5 times 2018 cash flow and 9.6 times anticipated cash flow for 2019. That makes both relatively cheap compared with their pipeline peers, considering that the average one sells for more than 11 times cash flow, though Enbridge is still a bit cheaper.

Enbridge comes out on top

While it's a very close race, Enbridge offers investors a higher yield, a slightly better balance sheet, stronger growth prospects, and a lower valuation. Those numbers make it a better buy over Williams Companies these days.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.