For Dividend Income, I’d Buy Telus Stock Over Enbridge Today

Enbridge (TSX:ENB) and Telus (TSX:T) are dividend studs that may be worth buying if you love passive income.

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Many Canadian dividend heavyweights are commanding yields that are well on the high side of their historical ranges. Undoubtedly, chasing yield can be a risky move, especially if you’re an investor who’s dependent on the quarterly income.

Still, it may be worthwhile to ditch that so-called “4% rule” in this high-rate world. Of course, you’ll need to focus on value and dividend stability with any stock you’re looking to scoop up shares of. With the risk-free rate well off their lows, dividend seekers may just be able to get a little more yield for a potentially deep-value price of admission.

As always, there are added risks of buying any stocks moving into a potential recession year. But with a dollar-cost averaging strategy (DCA), combined with a long-term mindset, I think the recent mauling of the Canadian dividend blue chips has created a golden opportunity.

Enbridge (TSX:ENB) and Telus (TSX:T) used to be reliable passive-income plays. But of late, they have fallen on hard times, and their share prices seem more like falling knives that places to safely park excess cash.


Enbridge isn’t just a pipeline behemoth with juicy, growing cash flows, it has a management team that puts shareholders ahead of all else. Indeed, if the firm were to reduce its payout, it would have done so a long time ago.

With that in mind, Enbridge is a shareholder-friendly firm whose dividend is likely far healthier than it seems. The stock currently yields 7.82% after its latest 22.6% nosedive off 2022 highs. Indeed, investors could grow increasingly wary as the share price falls while the yield swells further. With a new chief legal officer and chief administrative officer, Enbridge will have a lot to prove in the new year.

At 24.1 times trailing price to earnings, ENB stock seems like a fairly valued play if you’re looking for Steady Eddie in the midstream energy scene.

Despite the mouth-watering yield, Enbridge faces significant challenges. Even if the dividend is safe, the stock could have a lot of downside if recent big bets on U.S. utilities (which cost more than US$14 billion in cash and debt) don’t go its way.

Personally, I think a top-tier telecom like Telus is a better buy if you seek passive income.


Telus stock has crumbled around 36% from its high. The vicious move lower could certainly worsen, as knife catchers continue to get knicked on the way down. Of course, Telus stock can’t keep falling at this pace forever. But until rates can steady and reverse, it’s hard to imagine Telus will get any sort of relief. A recession could also eat into coming quarterly profits and drag shares into the high teens.

Given the severely oversold conditions, investors would be wise to be incremental buyers on weakness. There’s a lot of earnings pressure ahead, and it may not be so quick to pass. The 6.6% dividend yield is incredibly enticing. But is it enticing enough to reach out for the fast-falling knife?

This ultimately depends on your risk tolerance. At 26.9 times trailing price to earnings, Telus doesn’t scream deep value right here as earnings run into muddy waters.

Either way, I like T stock way more than ENB for its 5G exposure, which will shine again once the worst of headwinds move behind us. For now, Telus could benefit as it lightens up on expenses following its forgettable second quarter.

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 recommends Enbridge and TELUS. The Motley Fool has a disclosure policy.

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