Dividend stocks are always some of the most popular stocks that Canadian investors buy and hold in their Tax-Free Savings Accounts (TFSAs) due to the numerous advantages that they offer. And while many dividend stocks make excellent long-term investments, blue-chip dividend stocks like BCE (TSX:BCE) and Enbridge (TSX:ENB) are especially popular choices.
These stocks earn tonnes of cash flow each month and have highly resilient business models since much of their operations are defensive.
In addition to these advantages in normal times, they are especially important in this environment, when there is a lot more uncertainty both in the stock market and economy. However, while BCE and Enbridge are two of the top dividend stocks to buy in your TFSA, you may be wondering which stock is the better buy.
Since both companies are massive businesses with dominant positions in their industry, for many investors, it will come down to your current portfolio makeup. If you already have a tonne of exposure to energy, for example, BCE is likely the better stock for you, and vice versa.
Assuming investors have a well-balanced portfolio already, though, here’s what to consider and which stock is the better buy for your TFSA today.
With a market cap north of $57 billion, BCE is an excellent blue-chip dividend stock to buy for several reasons. First off, telecommunications is an essential industry, so much of BCE’s operations are highly resilient.
That means that the stock could see a slight impact from a recession, but for the most part, its revenue and cash flow should remain robust.
Furthermore, like Enbridge stock, it owns a lot of long-life assets, which require little maintenance allowing BCE to earn billions in cash flow each quarter.
It’s worth pointing out, though, that in recent years the telecom has spent a lot of money on capex to build out new infrastructure such as 5G technology and fibre-to-the-home. However, these elevated capex levels shouldn’t last much longer and should lead to continued dividend growth for years to come.
Today, the stock offers a yield that’s upwards of 6.2% and one that’s been increased for 14 consecutive years now.
However, although that’s an attractive yield and the dividend growth streak is impressive, BCE could face increased competition in the space, especially with Rogers’ recent acquisition of Shaw.
Therefore, although BCE is a high-quality and reliable stock, and it offers an attractive dividend yield if you have a well-balanced portfolio and aren’t worried about overexposing yourself to energy, Enbridge may be the better buy for your TFSA today.
Enbridge, a company with a market cap of more than $106 billion, is another massive blue-chip stock with many similarities to BCE.
Like BCE, it’s a stock with a dominant position in an industry that offers essential services. Furthermore, it’s also a cash cow that owns plenty of long-life assets, which constantly earns it billions in cash flow.
However, Enbridge stock looks like the better buy for your TFSA today because, in addition to facing less potential competition in the near term, it would also likely be less impacted by a potential recession.
Furthermore, Enbridge has a longer track record of dividend growth, at 27 consecutive years. It also has a more sustainable payout ratio. For example, even if Enbridge stock’s distributable cash flow comes in at the bottom of its 2023 guidance range, the stock’s payout ratio would only be 67.6% this year.
In addition to a safer dividend, Enbridge also offers a slightly higher dividend yield today, which is currently at roughly 6.8%.
Therefore, although both BCE and Enbridge are two high-quality dividend stocks that investors can buy for their TFSAs, it looks like Enbridge is the better of the two for investors looking to buy today.