The Motley Fool

Better Dividend Stock to Buy in July: Enbridge Inc. (TSX:ENB) or Hydro One Ltd. (TSX:H)?

Image source: Getty Images.

After rallying in April and May, the S&P/TSX Composite Index has stuttered, as trade tensions have provoked anxiety in investors. All three major U.S. indexes have also suffered amid the uncertainty. There is now a very real possibility that President Trump could move to impose tariffs on autos in the United States, which could lead to further retaliation by its major allies.

Today, we are going to focus on two dividend stocks that have bucked this trend and performed well over the past month. Both boast an attractive dividend but are facing challenges that have given investors pause in recent years. Which one is the better buy in July? Let’s dive in.

Enbridge Inc. (TSX:ENB)(NYSE:ENB)

Enbridge is the largest energy infrastructure company in North America. Shares of Enbridge were down 6.2% in 2018 as of close on July 5. The stock was down double digits over the past year. However, over the past month, Enbridge stock has surged over 10%. Can investors expect this momentum to continue into the second half of 2018?

Enbridge stock has capitalized off solid first-quarter results, a big regulatory win in late June, and positive movement for oil and gas prices. Adjusted earnings per common share rose to $0.82 in the first quarter compared to $0.57 in Q1 2017. On June 28, Minnesota regulators approved the Enbridge Line 3 replacement project. It was approved by all five members of the Public Utilities Commission, with some voicing reservations. Enbridge stock surged on the news.

The company has also benefited from solid momentum for oil and gas prices in the aftermath of an OPEC agreement that will see the Gulf nations and Russia ramp up production. Enbridge hiked its dividend by 10% which represents the 23rd consecutive year of dividend growth. The stock offers a quarterly dividend of $0.671 per share, or a 5.5% dividend yield.

Hydro One Ltd. (TSX:H)

Hydro One stock climbed 3.7% over the past month as of close on July 5. Shares have responded well following the contentious Ontario election. This may come as a surprise to some investors, as new premier Doug Ford vowed to pursue the firing of Hydro One CEO Mayo Schmidt. Ford took office on June 29 and has yet to broach the topic.

Hydro One released positive first-quarter results on May 15. It made strides in its pursuit of regulatory approval in the U.S. for the acquisition of Avista Corp., which will bring over 700,000 U.S. customers under Hydro One’s umbrella. Net income rose to $222 million compared to $167 million in the prior year, and adjusted earnings per share climbed to $0.35 over $0.28 in Q1 2017.

Hydro One also hiked its dividend by 5% to $0.23 per share, which represents a 4.4% dividend yield.

Which dividend stock should you go with?

Enbridge is an enticing pick up after its regulatory win in Minnesota. It boasts a superior dividend, and high oil prices should provide a tailwind in the second half of the year.

5 Canadian Growth Stocks Under $5

We are giving away a FREE copy of our "5 Small-Cap Canadian Growth Stocks Under $5" report. These are 5 Canadian stocks that we think are screaming buys today.

Get Your Free Report Today

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 Ambrose O'Callaghan owns shares of HYDRO ONE LIMITED. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.