Better Buy for Dividends – Enbridge or BCE Stock?

Given the favourable market conditions, higher dividend yield, and cheaper valuation, I am more bullish on Enbridge.

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The failure of several U.S. banks sent tremors through the market. The reassurance by the U.S. Federal Reserve by offering US$300 billion in short-term loans to cash-short banks has improved investors’ confidence. However, rising interest rates and sticky inflation continue to be a concern.

Given the uncertain outlook, investing in high-yielding dividend stocks would be prudent. With Enbridge (TSX:ENB) and BCE (TSX:BCE) offering over 6% dividend yields, let’s assess which of the two would be a better buy right now. First, let’s look at Enbridge’s financials and growth prospects.


Enbridge transports around 30% of crude oil produced in North America and 20% of the natural gas consumed in the United States. It is also the third-largest natural gas utility company in North America by customer count and has significant exposure to the renewable energy space. The company operates a highly regulated business, with commodity price fluctuations impacting only 2% of its cash flows.

Additionally, the company has substantial protection against rising prices, with around 80% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) having inflation protections. So, the company generates stable cash flows, allowing it to raise its dividends consistently. Enbridge has been paying dividends uninterruptedly since 1953. ENB stock has increased its dividends at an annualized growth rate of over 10% for the last 28 years. It currently pays a quarterly dividend of $0.8875, with its yield at an attractive 7.04%.

After putting around $4 billion in projects into service in 2022, Enbridge plans to put $3 billion and $11 billion worth of projects into service in 2023 and 2024, respectively. The export of LPG (liquified petroleum products) from North America to Europe is growing, which could benefit the company. Further, given its net available liquidity of $10 billion and a payout ratio of 65%, I believe the company’s future payouts are safe.


BCE is one of the three primary players in the Canadian telecommunication sector. Telecommunication services have become essential in the digital world, thus expanding the addressable market for BCE. Over the last three years, the company has invested around $14 billion, strengthening its 5G and broadband infrastructure. By the end of last year, the telecom had completed 80% of its planned broadband buildout program, while its 5G service covered 82% of the country’s population.

Meanwhile, BCE plans to make capital investments of $4.8 billion this year, which is lower than its $5.1 billion in 2022. With these investments, the company expects to complete 85% of its planned broadband buildout program and offer its 5G and 5G+ services to 85% and 71% of the Canadian population, respectively. These investments could continue to expand its customer base and grow its ARPU (average revenue per user), thus boosting its financials. However, rising interest rates could hurt its margins. So, the company’s management expects its 2023 adjusted EPS (earnings per share) to decline by 3-7%.

Meanwhile, given its recurring source of revenue, BCE enjoys stable cash flows, thus allowing it to raise its quarterly dividend by over 5% annually for the last 15 years. Also, its dividend yield for the next 12 months stands at a healthy 6.37%.

Investor takeaway

Although both companies offer a dividend yield of over 6%, I am more bullish on Enbridge due to the favourable market conditions amid rising LPG exports from North America, a cheaper valuation, and higher dividend yield. Enbridge trades at an NTM (next 12 months) price-to-sales multiple of 1.9 compared to BCE’s 2.2.

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 Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.

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