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TFSA Investors: Should You Buy Royal Bank of Canada or Enbridge Inc. Today?

With the market looking like it might be headed for some turbulent times, Canadians are searching for quality dividend stocks to add to their Tax-Free Savings Account (TFSA) portfolios.

Let’s take a look at Royal Bank of Canada (TSX:RY)(NYSE:RY) and Enbridge Inc. (TSX:ENB)(NYSE:ENB) to see if one is more attractive right now.

Royal Bank

The Canadian banks have been under pressure in recent weeks after CBC released a number of articles that quoted current and former bank employees who said they had engaged in questionable sales tactics to meet their targets.

The buzz appears to be dying down, and bank stocks are beginning to recover some of the modest losses. Royal Bank actually didn’t take much of a hit at all, especially when you consider how much the stock has rallied over the past year. At the time of writing, the shares are trading just shy of the all-time high.

It’s easy to understand why the stock has held up so well. Royal Bank earned more than $10 billion last year, and the odds are pretty good that it will top that amount again in fiscal 2017.

The secret to the continued success lies in the company’s balanced revenue stream with strong operations in personal and commercial banking, wealth management, capital markets, and insurance.

Royal Bank is also expanding its reach into the United States. Royal Bank bought California-based commercial and private bank City National in late 2015, giving the company a strong presence in an attractive segment.

Investors could see further investments in the U.S. in the coming years.

The stock has a strong history of dividend growth and currently provides a yield of 3.6%.


Enbridge recently completed its $37 billion acquisition of Spectra Energy. The move creates North America’s largest energy infrastructure company and sets investors up for some strong dividend growth.


Enbridge now has $27 billion in near-term projects on the go plus an additional $48 billion in longer-term developments. As the new assets are completed and go into service, Enbridge expects cash flow to increase enough to support annual dividend increases of at least 10% through 2024.

The current distribution provides a yield of 4.2%.

Is one more attractive?

Both companies should be solid buy-and-hold picks for a TFSA account.

Royal Bank has had a stellar run in the past six months, so the stock might be due for a pullback.

Enbridge currently provides a higher yield and likely offers better dividend-growth prospects over the medium term, so I would probably make the pipeline giant the first pick today.

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

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