Some say the stock market is a gamble. It is a gamble for those who speculate and trade. But when you invest, you reap the benefits of staying loyal to the stock you invest in. If you have $1,000 and are worried you might splurge on things you don’t need, you can invest it right now in two no-brainer stocks: BCE (TSX:BCE) and Enbridge (TSX:ENB).
Why is BCE a no-brainer stock?
No matter from whichever angle you see, BCE and Enbridge are touching your daily lives. And you can’t live without them.
BCE is the telecom provider the majority of Canadians use. Even in the most difficult of situations, you will pay your telecom bill since the internet is a necessity. Hence, a telecom giant like BCE is unlikely to go out of service anytime soon. In fact, the 5G ecosystem will set the stage for artificial intelligence (AI) technology to evolve.
BCE is undergoing a restructuring of its business. It is reducing the focus on declining businesses like radio and electronic stores and channelling its focus on growth areas. In this 5G age, being a telco won’t suffice. A telco also has to provide technology services. Hence, BCE is investing in cloud and security services, advanced advertising and digital transformation. Once this transformation is complete, BCE could significantly benefit from AI at the edge.
Why is BCE a buy right now?
BCE, in its 2023 earnings, gave a slightly tepid outlook for 2024. It expects a dip in free cash flow (3-11%) and earnings per share (7-2%) in 2024 due to high interest expense and high depreciation from its accelerated capital spending. Moreover, there would be a significant one-time severance pay, as it lays off 4,800 employees in 2024 as part of restructuring.
Considering all these expenses, BCE has slowed its dividend growth rate to 3.1% this year from 5% in 2023. Hence, BCE stock fell 9.77% in the last three weeks. It is trading closer to its pandemic low of $51.
Once the Bank of Canada cuts interest rates, BCE could restructure its debt and reduce its interest expense. Moreover, the cost reduction and restructuring could enhance operating efficiency and boost its long-term profit margins. The company will probably pass these benefits to shareholders through higher dividend growth.
Now is the time to buy 10 BCE shares for a little over $500 and lock in $39.9 in annual dividend income for the next decade or more. This income will likely grow as BCE increases its dividend per share. And since the stock is at its bottom, there is a low risk of further downside and a high probability of upside.
Why is Enbridge a no-brainer stock?
You can buy Enbridge stock anytime without a doubt because of its large pipeline infrastructure. Pipelines are the most efficient form of transporting oil and gas. Since Canada transports 99% of its oil production to America, Enbridge pipelines have a high usage. Moreover, the difficulty in building new pipelines is making the existing ones even more valuable. This gives Enbridge an edge to increase the toll price if needed.
This year is important for Enbridge, as it accelerates its revenue exposure to natural gas. It is on track to complete the acquisition of three U.S. gas utilities and bring $4 billion worth of capital projects into service. It is double the $2 billion capital brought into service in 2023. Once these projects come online, Enbridge’s distributable cash flow could grow by 3-5%.
Why is Enbridge a buy right now?
Unlike BCE, Enbridge stock is not trading near its pandemic low. But the stock is trading near the lower range of its $43-$54 price range. The company has increased its 2024 dividend by 3.1%, while the stock price has fallen 6.9% since mid-January. It means you can lock in a higher yield of 7.95%.
Now is the time to buy 10 Enbridge shares for a little over $460 and lock in $36.6 in annual dividend income for the next decade or more. This income will likely grow as Enbridge increases its dividend per share.
