Both Enbridge (NYSE:ENB) and TC Energy (NYSE:TRP) have a strong track record of dividend and earnings growth. TC Energy has raised its dividend for 19 consecutive years. Enbridge has paid dividends for more than 65 years. While the two stocks look similar on the surface, a deeper dive into the financials reveal that one of them has the potential to generate meaningfully higher returns for investors. 

Enbridge's better performance

The two midstream companies have consistently raised their dividends over the years supported by strong earnings growth. However, Enbridge grew earnings at a higher rate in the last five years. Enbridge's earnings adjusted for one-off charges grew at an average rate of roughly 30% over the last five years compared to average growth of 19% for TC Energy. 

Year Over year earnings growth for ENB and TRP from 2015-2019

Data Source: Enbridge, TC Energy. Chart by author.

Similarly, Enbridge's dividends grew at an average rate of 16% in five years compared to average growth of 9% for TC Energy. In the last 20 years, Enbridge's dividends grew at an average rate of more than 12%. Finally, Enbridge stock is offering around 140 basis points higher yield than TC Energy. 

Enbridge's growth projects

One of the key factors contributing to Enbridge's higher yield is its stock's underperformance relative to TC Energy over the last couple of years. Enbridge is perceived to have a higher project completion and execution risk possibly due to delays in its key Line 3 Replacement project. Further, the company reported one fatality due to a rupture on its Texas Eastern natural gas pipeline in August. 

Enbridge earlier suggested a delay in the Line 3 Replacement project but expected to complete it in 2020. However, in its latest statement, the company said the timeline for all approvals cannot be determined. The recurring delays are sure to result in the project's cost exceeding its original budget. While the Line 3 Replacement project is key, I think the market is pricing in the risk more than it really is. The Canadian portion of the project is already placed into service. The US portion, which costs less than the Canadian part, is pending regulatory approvals in Minnesota. Notably, the pipeline is more than 50-year-old and is running at half its capacity since 2010. The replacement will allow Enbridge to restore it to its original capacity. Apart from the US portion of the Line 3 Replacement project, Enbridge has CA$7 billion of secured growth projects. 

Oil pipelines.

Image source: Getty Images.

TC Energy's growth outlook

TC Energy's project backlog looks more attractive with CA$30 billion of secured projects, which are commercially supported. Key projects include NGTL and Coastal GasLink projects. Additionally, the company has another CA$20 billion of projects under development including Keystone XL and Bruce Power. 

So, both TC Energy and Enbridge have strong project backlogs. Both companies' pipeline of growth projects should support their respective future earnings growth. TC Energy expects an 8% to 10% dividend growth through 2021. Enbridge has raised its 2020 dividend by 9.8%. 

And the better buy goes to...

Both TC Energy and Enbridge are rock-solid investments with a strong dividend history. On the leverage front, both are near the high four times debt-to-EBITDA. Both companies offer strong prospects fueled by capital projects. However, Enbridge's higher yield, and it's better recent earnings and dividend performance, gives it a definite edge as an investment option currently. 

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.