Energy infrastructure stocks should benefit from the recovery in demand for oil and natural gas.

TC Energy

TC Energy (TSX:TRP)(NYSE:TRP) is an energy infrastructure giant with a market capitalization of $70 billion and over $100 billion in assets located in Canada, the United States and Mexico.

The natural gas group operates 93,300 km of pipelines and more than 650 billion cubic feet of storage. The grid transports a quarter of the natural gas used in North America to generate electricity, heat homes and businesses, and power commercial operations.

Natural gas is in high demand globally as utilities convert power generation facilities from oil and coal to natural gas. The war in Ukraine has led to new demand for North American liquefied natural gas (LNG), as European countries scramble to find new suppliers to replace Russia.

TC Energy has established strategic grid infrastructure to move natural gas from major US producing areas such as the Marcellus and Utica areas to LNG facilities on the US Gulf Coast. The company is also building a new pipeline in Canada that will connect producers to a new LNG facility on the BC coast.

Other divisions of TC Energy include oil pipelines and power generation facilities. These provide a balanced income stream that generates reliable cash flow.

TC Energy is working on a $25 billion investment program. As new assets are completed and come into service, the company expects cash flow growth to support annual dividend increases of 3-5%.

Management expects 2022 EBITDA to be higher than last year and earnings per share to be in line with 2021.

The stock is trading at nearly $73.50 per share at the time of writing and offers a dividend yield of 4.9%.

Pembina pipeline

Pembina pipeline (TSX:PPL)(NYSE:PBA) markets itself as a one-stop-shop for oil and gas producers primarily located in Western Canada who require pipeline, gas gathering, gas processing and logistics. The company is a major midstream player in the industry and has grown steadily over the past 65 years through strategic acquisitions and organic projects.

Pembina Pipeline also has propane export facilities and is evaluating an LNG opportunity.

The company generated strong results in the first quarter of 2022. Adjusted EBITDA hit a record $1 billion, compared to $835 million in the first three months of last year.

Pembina Pipeline has raised its guidance for 2022. Adjusted EBITDA is now expected to be between $3.45 billion and $3.6 billion, up from $3.35 billion to $3.55 billion in the previous guidance.

Cash flow from operating activities is expected to exceed dividends and capital expenditures for the year. Pembina Pipeline uses excess cash to buy back shares as well as pay down debt, new capital investments and potentially higher dividends.

The stock is trading at nearly $51 per share at the time of writing and offers a dividend yield of 4.9%.

Are TC Energy or Pembina Pipeline stocks a buy?

The rebound in the energy market is expected to continue for some time and demand for North American oil and natural gas is on the rise. TC Energy and Pembina Pipeline are both blue chip energy infrastructure players that stand to benefit over the next few years.

At this point I would probably split a new investment between the two stocks. TC Energy offers decent dividend growth prospects while Pembina Pipeline could become a takeover target as the sector consolidates. They currently offer similar dividend yields and should generate strong total returns over the next few years.