If you’re in search of a great dividend-growth stock to buy and hold for decades, then you’ve come to the right place. Let’s take a closer look at two high-quality stocks that you could buy right now.
BCE Inc. (TSX:BCE)(NYSE:BCE) is Canada’s largest communications company. It provides a wide range of communications and content services to consumer, residential, business, and government customers across the country. As of September 30, it has approximately 20.94 million subscribers.
BCE currently pays a quarterly dividend of $0.6825 per share, representing $2.73 per share on an annualized basis, giving its stock a juicy 4.7% yield today.
Even though BCE is one of the most well-known and trusted brands in Canada, it’s very important to confirm the safety of a stock’s dividend before investing, and you can do this by checking its cash flow. In its nine-month period ended on September 30, its free cash flow totaled $2.3 billion, and its dividend payments totaled just $1.71 billion, resulting in a 74.3% payout ratio, which is within its target payout range of 65-75%.
In addition to its high and safe yield, BCE offers dividend growth. Following its next quarterly payment, which is payable on January 15 to shareholders of record at the close of business on December 15, fiscal 2016 will officially mark the eighth consecutive year in which it has raised its annual dividend payment.
BCE’s dividend-growth potential is very high going forward as well. As mentioned before, it has a target dividend-payout range of 65-75% of its free cash flow, so I think its consistently strong growth, including its 10.6% year-over-year increase to $2.3 billion in the first nine months of 2016, and the future growth that will come from its acquisition of Manitoba Telecom Services Inc., which is expected to close at the end of 2016 or early 2017, will allow its streak of annual dividend increases to continue through 2025 at the very least.
Enbridge Income Fund Holdings Inc.
Enbridge Income Fund Holdings Inc. (TSX:ENF), or ENF for short, is a publicly traded corporation that holds a 56.6% ownership stake in Enbridge Income Fund. Through its investment in Enbridge Income Fund, it indirectly holds ownership interests in high-quality, low-risk energy infrastructure assets across North America, including oil and natural gas pipelines, oil storage facilities, and green-power-generation facilities, all of which are operated by Enbridge Inc.
ENF currently pays a monthly dividend of $0.1555 per share, representing $1.866 per share on an annualized basis, which gives its stock a whopping 5.4% yield today.
As mentioned previously, it’s very important to confirm the safety of a stock’s dividend, and you can do this with ENF by checking its dividend payments as a percentage of its earnings. In its nine-month period ended on September 30, its earnings totaled $185 million ($1.60 per share), and its dividend payments totaled just $161 million ($1.3995 per share), resulting in a solid 87% payout ratio.
Like BCE, ENF has a track record of dividend growth as 2016 officially marks the sixth consecutive year in which it has raised its annual dividend payment. It also has a dividend-growth target of 10% annually through 2019, and I think its very strong operational performance, including its 16.8% year-over-year increase in earnings to $1.60 per share in the first nine months of 2016, will allow it to achieve this target and extend it beyond 2019.
Should you prefer one to the other?
BCE and ENF both offer high, safe, and growing dividends, making them strong buys in my book. With this being said, I don’t prefer one to the other, so I’d either buy both or flip a coin to decide between them.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. 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, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Joseph Solitro has no position in any stocks mentioned.