The S&P/TSX Composite Index rose 17 points to close out the previous week on February 11. Futures in United States markets are in the red at the time of this writing. Investors should brace for more volatility, as the possibility of rate hikes looms large in March. Today, I want to compare two of the top dividend stocks on the TSX: Enbridge (TSX:ENB)(NYSE:ENB) and Royal Bank (TSX:RY)(NYSE:RY). Which is the better buy in the middle of February? Let’s jump in.
Why Enbridge is the ultimate dividend stock to hold in 2022
Enbridge a Calgary-based company that operates the largest energy infrastructure business in North America. Shares of this dividend stock have climbed 12% in 2022 as of close on February 11. The stock is up 25% from the previous year.
Canadian energy stocks have built nice momentum over the past year. Oil and gas prices have surged on the back of increased demand and an ongoing supply crunch. In January, a Goldman Sachs research note projected that the price of WTI crude would breach the US$100 mark this year. That could vault Canadian energy stocks like Enbridge to new heights.
The company released its fourth-quarter and full-year 2021 results on February 11. For the full year, it delivered adjusted earnings of $5.6 billion, or $2.74 per common share. That was up from $4.9 billion, or $2.42 per common share, in the previous year. Meanwhile, it posted adjusted EBITDA of $14.0 billion — up from $13.3 billion in 2020. Enbridge went on to advance its current $10 billion secured growth program. Ideally, this will support distributable cash flow (DCF) growth of 5-7% per share growth through 2024.
Shares of this dividend stock possess a favourable price-to-earnings (P/E) ratio of 19. It recently hiked its quarterly dividend by 3% to $0.86 per share. That represents a tasty 6.1% yield.
Canada’s top bank is still worth snatching up in February
Royal Bank is the largest financial institution in Canada and the largest stock by market cap on the TSX. Shares of this top bank stock have climbed 6.8% so far this year. This stock has increased 37% in the year-over-year period.
Canada’s Big Six banks put together a banner year in 2021. In December 2021, I’d reflected on this and discussed whether it was time to take profits in Royal Bank and its peers. The bank is set to unveil its first-quarter 2022 earnings on February 24.
In 2021, Royal Bank achieved net income growth of 40% to $16.1 billion. Meanwhile, it delivered diluted earnings-per-share growth of 41% to $11.06. Like its peers, Royal Bank saw profits soar due to strong volume growth and a huge dip in provisions set aside for credit losses. The bank delivered 54% earnings growth in Personal and Commercial Banking and 22% earnings growth in Wealth Management.
This dividend stock last had a solid P/E ratio of 13. It offers a quarterly dividend of $1.20 per share, which represents a 3.2% yield.
Which dividend stock is the better buy today?
The sectors Enbridge and Royal Bank belong to may be geared up for another strong 2022. I’ve discussed the bullish signs for oil and gas going forward. Meanwhile, Canada’s top banks could see profit margins receive a boost if interest rates climb quickly. That said, I’m more inclined to snatch up Enbridge today. It offers nice value and investors can gorge on its fantastic dividend payments.
