Better Dividend Buy: BCE (TSX:BCE) or Enbridge (TSX:ENB)

BCE and Enbridge pay attractive dividends with high yields.

| More on:
edit Businessman using calculator next to laptop

Image source: Getty Images.

Pensioners and other TSX dividend investors seeking reliable passive income are wondering if the recent market correction is a good opportunity to add BCE (TSX:BCE) or Enbridge (TSX:ENB) stock to their self-directed Tax-Free Savings Account (TFSA) portfolios.

BCE

BCE stock trade near $63 per share compared to $73 in April last year. The stock is actually off the 12-month low of about $56 it hit in October, but even after the bounce the pullback still looks overdone.

BCE should be a good stock to own during a recession. The bulk of the revenue stream comes from mobile and internet subscription services. These are required by businesses and residential clients regardless of the state of the economy. Streaming and TV subscriptions might be more at risk of a cut, but most people will slash spending on other discretionary items before giving up their in-home entertainment. In addition, the TV service is usually bundled with the mobile and internet, so cutting it out might not save much money.

This doesn’t mean BCE is immune to an economic downturn. BCE’s media group, which includes a television network, radio stations, specialty channels, sports teams, and digital platforms is already seeing customers reduce ad spending as they battle with high inflation and rising borrowing costs. This trend could continue if businesses start to see a meaningful decline in consumer spending in the next 12-18 months.

Recession fears and a drop in adjusted earnings are likely the reason the stock is down, but BCE has the power to increase prices for its core wireline and wireless services when it needs more cash and the guidance for 2023 calls for revenue and free cash flow to actually increase compared to 2022. Earnings are forecast to dip a bit, but BCE remains very profitable, and investors should still see a decent dividend hike next year.

The board raised the payout in each of the past 15 years with an annual increase of at least 5%. At the time of writing, BCE stock provides a 6.1% dividend yield.

Enbridge

Enbridge trades for less than $50 per share at the time of writing compared to $59.50 at the peak last year.

The latest downward leg is due to fears that one of the company’s main pipelines, Line 5, could be temporarily shut down as a result of erosion near the line in Wisconsin. This could send the stock price lower in the near term, but the pullback already appears overdone.

Enbridge generated solid first-quarter (Q1) 2023 results that were in line with the same period last year. The $17 billion capital program and a new agreement with producers to secure space on the Mainline system for several years should help support targeted earnings and cash flow growth of about 3% through 2025 and 5% beyond that timeline.

As a result, investors should see the streak of 28 consecutive annual dividend increases continue. At the current share price, the existing dividend provides an annualized yield of 7.1%.

Is one a better buy today?

BCE and Enbridge pay solid dividends that should continue to grow. Both stocks appear cheap right now and deserve to be on your radar for a TFSA focused on passive income. If you only buy one, I would probably make Enbridge the first choice today. The stock looks oversold and the 7% yield is very attractive.

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 Andrew Walker owns shares of BCE and Enbridge.

More on Dividend Stocks

Canadian stocks are rising
Dividend Stocks

Looking for Big Passive Income? 2 Easy REITs to Consider

H&R REIT (TSX:HR.UN) and SmartCentres REIT (TSX:SRU.UN) could help fund your retirement.

Read more »

Family relationship with bond and care
Dividend Stocks

CPP Pension: 1 Move to Increase Your Payouts by $6,877 Per Year

Canadian retirees can consider boosting their CPP payouts by delaying the benefit and investing in blue-chip dividend stocks.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

This 8.6% Dividend Stock Pays Cash Every Month

Diversified Royalty is a high-dividend stock that offers a tasty yield in 2024. Is the TSX dividend stock a buy…

Read more »

rain rolls off a protective umbrella in a rainstorm
Dividend Stocks

3 Safe Canadian Dividend Stocks to Buy and Hold Forever

Here are three of the safest Canadian dividend stocks you can buy now and hold as long as you want.

Read more »

edit Taxes CRA
Dividend Stocks

Master Your Taxes: Get More Back from the CRA This Year

Mastering your taxes by knowing old and new tax deductions can lighten your tax burden in 2024.

Read more »

question marks written reminders tickets
Dividend Stocks

What’s the CPP Contribution Amount for 2024?

The second phase of CPP enhancement has begun. Know how much CPP contribution your employer will deduct from your 2024…

Read more »

Payday ringed on a calendar
Dividend Stocks

Buy 1,026 Shares of This Quality Dividend Stock for $100 in Monthly Passive Income

High-dividend TSX stocks such as Slate Grocery can help you generate stable passive income in 2024.

Read more »

top TSX stocks to buy
Dividend Stocks

How to Build a Bulletproof Monthly Passive-Income Portfolio With Just $7,000 in 2024

These monthly passive-income investments can turn your TFSA into a powerhouse passive-income producer -- all with just $7,000.

Read more »