BCE (TSX:BCE)(NYSE:BCE) is a dividend darling that’s hard to break up with. The stock sports a bountiful 5.3% yield, it’s as safe as they come, and it’s subject to impressive growth moving forward. At today’s rich valuations, however, investors can do far better.
Like it or not, the industry environment ahead of BCE isn’t as bright as the path that lies behind the firm that’s benefited from the perks of being a member of the famous or perhaps infamous Big Three telecoms.
In the first half of 2019, valuations in defensive dividend stocks like the telecoms moved higher. At this juncture, I think it’s time to take profits and move on to the next opportunity. Without further ado, here are two hand-picked dividend stocks that pay you more than BCE that you may want to consider for your income fund.
Sporting a 6.2% yield, Enbridge (TSX:ENB)(NYSE:ENB)’s dividend is nearly a full percentage point higher than BCE. The only difference? Enbridge’s stock is under a considerable amount of pressure, and the stock is trading at much more reasonable valuations because of this.
In simple terms, you’re getting a bit more yield for a much cheaper price on a price to sales and book basis. Also, you’re also getting a 10% dividend hike next year. If I had to guess, the shareholder-friendly management team will be set to announce a renewal to its annual dividend hike commitment.
The Line 3 project got delayed, the stock got hit, but if you’re bullish on Canadian energy and have a long time horizon, Enbridge may prove to be a far better bet in five years time.
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Sticking with the pipeline theme, we’ve got Inter Pipeline (TSX:IPL), a stock currently yielding 7.84%. While the dividend may seem distressed based on its chart, investors would be comforted to know that help is on the way with the firm’s cash-flow-generative projects that are slated to come online gradually over the next three years.
If you’re not afraid of a bit more volatility, there are substantial rewards to be had with the name — not just with the enhanced dividend yield, but with potential capital gains as Canada’s energy sector slowly gets back on the right track.
Pipeline plays are out of favour now, but if you’ve got the time and excess capital to invest, now is as good a time as any to go against the grain.
Stay hungry. Stay Foolish.
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 Joey Frenette has no position in any of the stocks mentioned. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.