Better Buy: Enbridge vs. Magellan Midstream Partners
North American midstream giant Enbridge (NYSE: ENB) distributes a fat dividend that today yields 8.2%. But that pales in comparison to smaller peer Magellan Midstream Partners (NYSE: MMP), whose distribution right now yields a huge 12%. Both have decades of annual disbursement hikes under their belts, and both operate in the same sector, but they are far from interchangeable as investments. Here's what you need to understand before you simply buy the higher yield.
Canadian Enbridge sports a market cap of nearly $61 billion, dwarfing Magellan's $7.6 billion valuation. Magellan is an important industry player in the North American energy industry, but it just doesn't have the same scale. For example, Magellan's business is largely in the pipeline space, where it's split about 60%/40% between refined products and oil. Enbridge's business includes oil pipelines (about 55% of adjusted EBITDA), natural gas pipelines (27%), natural gas distribution (13%), and renewable power (the rest). It wouldn't quite be accurate to suggest that Enbridge is massively more diversified, but it does have its fingers in more pies.
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Source Fool.com
