Critical Comparison: South Bow (NYSE:SOBO) and Enbridge (NYSE:ENB)

South Bow (NYSE:SOBO) and Enbridge (NYSE:ENB) are both energy companies, but which is the better stock? We will compare the two businesses based on the strength of their risk, profitability, institutional ownership, dividends, earnings, analyst recommendations and valuation.

Institutional and Insider Ownership

54.6% of Enbridge shares are owned by institutional investors. 0.4% of Enbridge shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Dividends

South Bow pays an annual dividend of $2.00 per share and has a dividend yield of 7.9%. Enbridge pays an annual dividend of $2.71 per share and has a dividend yield of 6.1%. South Bow pays out 108.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Enbridge pays out 139.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Enbridge has increased its dividend for 2 consecutive years. South Bow is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares South Bow and Enbridge”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
South Bow	$2.12 billion	2.48	$385.21 million	$1.85	13.64
Enbridge	$53.47 billion	1.82	$3.61 billion	$1.94	22.98

Enbridge has higher revenue and earnings than South Bow. South Bow is trading at a lower price-to-earnings ratio than Enbridge, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and recommmendations for South Bow and Enbridge, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
South Bow	2	8	1	2	2.23
Enbridge	0	3	4	0	2.57

South Bow currently has a consensus price target of $26.25, suggesting a potential upside of 4.04%. Enbridge has a consensus price target of $67.00, suggesting a potential upside of 50.29%. Given Enbridge’s stronger consensus rating and higher possible upside, analysts clearly believe Enbridge is more favorable than South Bow.

Profitability

This table compares South Bow and Enbridge’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
South Bow	N/A	N/A	N/A
Enbridge	10.04%	10.16%	3.08%

Summary

Enbridge beats South Bow on 13 of the 17 factors compared between the two stocks.

About South Bow

South Bow Corp is a strategic liquids pipeline company. It is a new liquids-focused midstream infrastructure company. South Bow Corp is based in Canada.

About Enbridge

Enbridge Inc., together with its subsidiaries, operates as an energy infrastructure company. The company operates through five segments: Liquids Pipelines, Gas Transmission and Midstream, Gas Distribution and Storage, Renewable Power Generation, and Energy Services. The Liquids Pipelines segment operates pipelines and related terminals to transport various grades of crude oil and other liquid hydrocarbons in Canada and the United States. The Gas Transmission and Midstream segment invests in natural gas pipelines and gathering and processing facilities in Canada and the United States. The Gas Distribution and Storage segment is involved in natural gas utility operations serving residential, commercial, and industrial customers in Ontario, as well as natural gas distribution activities in Quebec. The Renewable Power Generation segment operates power generating assets, such as wind, solar, geothermal, waste heat recovery, and transmission assets in North America. The Energy Services segment provides physical commodity marketing and logistical services to refiners, producers, and other customers in Canada and the United States. The company was formerly known as IPL Energy Inc. and changed its name to Enbridge Inc. in October 1998. Enbridge Inc. was founded in 1949 and is headquartered in Calgary, Canada.