Is Enbridge Inc. or BCE Inc. a Better Dividend Stock for Your RRSP Today?

Enbridge Inc. (TSX:ENB)(NYSE:ENB) and BCE Inc. (TSX:BCE)(NYSE:BCE) are two of Canada’s top dividend stocks. Is this the right time to buy?

| More on:
think, plan, and act to work towards your financial goals

Canadian savers are searching for the best dividend stocks to add to their RRSP portfolios.

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

Enbridge

Enbridge bought Spectra Energy last year in a $37 billion deal that created North America’s largest energy infrastructure company.

Spectra added important gas assets to complement Enbridge’s focus on liquids pipelines, and it provided a nice boost to the near-term capital program. Enbridge is currently working through $22 billion in projects that should be completed through 2020. As revenue and cash flow increase, investors should see continued dividend growth in line with the historic trend.

Enbridge has increased the payout for 23 straight years at an average compound annual dividend-growth rate of 11%. The company raised its distribution by 10% for 2018.

Management recently announced deals to sell $3 billion in non-core assets as part of a strategic shift to focus on regulated businesses. The proceeds will be used to strengthen the balance sheet and help fund further development.

The stock is down from $56 a year ago to $42 per share amid concerns rising interest rates will drive up debt costs and lure investors away from go-to dividend stocks. The market is also worried about Enbridge’s long-term growth opportunities, given recent opposition to big pipeline projects.

These are valid points to consider, but the pullback looks overdone, and that’s starting to attract contrarian investors. In fact, Enbridge has already bounced more than 10% off the recent low. More gains could be on the way, and investors who step in today can still pick up a solid 6.3% yield.

BCE

BCE is also down, as investors wonder about a possible exodus out of the stock in favour of fixed-income alternatives. In addition, rising interest rates could push up debt costs and put a dent in cash flow available for dividends.

As with Enbridge, there is some merit to the concerns, but the sell-off in BCE since December might have gone too far.

The company reported steady Q1 2018 results and expects to see earnings per share and free cash flow grow through 2018. As a result, the dividend should be very safe and now provides a 5.7% yield.

At the time of writing, investors can pick up BCE for $53 per share compared to $63 last December.

Is one more attractive?

Both Enbridge and BCE should be solid buy-and-hold picks for a dividend-focused RRSP portfolio.

If you only choose one, Enbridge likely offers better dividend-growth prospects over the near term, and investors could see a nice rally on news of further non-core asset sales.

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 Andrew Walker owns shares of BCE and Enbridge. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

analyze data
Dividend Stocks

Got $1,500? You Can Confidently Add These 3 Stocks to Your Portfolio

If potential bear market conditions worry you, consider adding these three reliable TSX stocks to your portfolio.

Read more »

edit Person using calculator next to charts and graphs
Dividend Stocks

Better Buy: Fortis Stock vs Enbridge

Fortis stock and Enbridge are top dividend stocks on the TSX today. Which stock is better buy for safe dividend…

Read more »

Canadian Dollars
Dividend Stocks

How to Make $1,500 in Passive Income 4 Times a Year

Blue-chip TSX stocks such as Enbridge can enable investors to create game-changing wealth over the long term.

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Dividend Stocks

TFSA: How to Easily Turn $10,000 Into $500/Year of Passive Income

You don't need to be a stock market expert to turn $10,000 into a $500 of tax-free passive income. Here's…

Read more »

protect, safe, trust
Dividend Stocks

Worried About a Recession? 2 TSX Blue-Chip Stocks to Protect Your Capital

If you fear a recession coming on soon, here are two blue-chip Canadian stocks to add to your portfolio for…

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

New TFSA Investors: 2 Top TSX Stock to Create a Self-Directed Retirement Fund

Top TSX dividend stocks are now on sale for new TFSA investors.

Read more »

money while you sleep
Dividend Stocks

Worried About the Market? 2 Dividend Stocks That Let You Sleep at Night

Here's why Restaurant Brands (TSX:QSR) and Enbridge (TSX:ENB) are two top dividend stocks to buy in this uncertain market right…

Read more »

money cash dividends
Dividend Stocks

How 1 Absurdly Cheap Stock Can Generate $100 in Monthly Passive Income

You can generate $100 or more in monthly passive income from one high-yield stock trading at an absurdly cheap price…

Read more »