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Dividend Investors: Should You Own Enbridge Inc. or Toronto-Dominion Bank?

Investors are always searching for top dividend-growth stocks to add to their portfolios.

Let’s take a look at Enbridge Inc. (TSX:ENB)(NYSE:ENB) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) to see if one is more attractive right now.

Enbridge

Enbridge is in the process of buying Spectra Energy for $37 billion in a deal that will create the largest energy infrastructure company in North America.

Public resistance to major oil pipelines and the ongoing difficulties in the energy patch likely spurred the move, but investors are poised to benefit as a result.

Why?

The two companies have a near-term development portfolio of $26 billion in commercially secured projects. As these assets are completed and put into service, Enbridge expects to see cash flow increase enough to support annual dividend growth of at least 10% per year through 2024.

In 2017, the company plans to hike the distribution by 15%.

Rising oil prices are encouraging oil producers to ramp up spending, and that bodes well for demand for new infrastructure. The recovery might still hit some speed bumps, but Enbridge is positioned well to benefit when better days arrive.

The current quarterly distribution yields 3.7%.

TD

TD continues to deliver strong results, despite some economic headwinds facing the Canadian economy.

One reason for the company’s ongoing success is the large business located in the United States. Most investors don’t realize that TD actually has more branches south of the border than it does in the home market.

The U.S. retail business has grown significantly over the past decade, and TD is now considered one of the top 10 U.S. banks.

The pace of acquisitions has slowed, but management is still finding compelling U.S. targets, as seen with the recently announced deal to buy Scottrade. Under the agreement, the TD Ameritrade partnership will take the brokerage business and TD’s U.S. banking group will get the bank assets.

With the U.S. recovery picking up steam and continued strength expected in the American dollar, investors should see strong results from the American division.

What about risks?

TD doesn’t have much exposure to the energy sector, but it does have a large portfolio of Canadian residential mortgages.

The company is more than capable of riding out a downturn in the housing market, but a very sharp decline in home prices over a short period of time would likely trigger an exit out of Canadian bank stocks, and TD would probably get caught in the stampede.

For the moment, it’s full steam ahead. The stock has enjoyed a fantastic run over the past year and now trades at an all-time high.

TD’s quarterly dividend yields 3.25%.

Which one should you own?

Both stocks are proven long-term dividend-growth winners and deserve to be in any buy-and-hold dividend portfolio.

At this point, however, Enbridge is probably more attractive given its dividend-growth outlook and the fact that the energy sector appears to be on the verge of a recovery.

TD has had such a big run that the stock is probably fully valued right now and could be at risk of a pullback in the near term.

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Fool contributor Andrew Walker has no position in any stocks mentioned. The Motley Fool owns shares of Spectra Energy. Spectra Energy is a recommendation of Stock Advisor Canada.

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