A Dividend Giant I’d Buy Over Enbridge Stock Right Now

While Enbridge is a good TSX dividend stock to own in 2024, Whitecap is positioned to grow its dividends at a much higher pace.

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After adjusting for dividend reinvestments, Enbridge (TSX:ENB) stock has returned more than 850% to shareholders in the last 20 years. Despite these outsized gains, the TSX dividend stock currently offers investors a tasty forward yield of 7.6%.

Two reasons for Enbridge’s elevated dividend yield are the company’s historical dividend growth and the recent pullback in share prices. Since 1995, Enbridge has raised dividends by roughly 10% annually, enhancing the yield at cost significantly. Moreover, in the last two years, capital-intensive companies part of sectors such as energy, utilities, and real estate have trailed the broader markets due to interest rate hikes. Right now, ENB stock trades 20% below all-time highs, allowing you to buy a quality company at a lower multiple.

Is Enbridge stock a good buy right now?

Enbridge operates the largest liquid pipeline system in North America and transports 30% of the continent’s crude oil. It also delivers 20% of the natural gas consumed in the U.S., providing the company with a wide competitive moat.

Last year, Enbridge disclosed plans to acquire three natural gas utilities from Dominion Energy for $19 billion. These acquisitions will create North America’s largest natural gas utility, serving approximately 20 million people.

Further, Enbridge continues to expand its base of cash-generating assets and is gaining traction in the clean energy segment. It ended the first quarter (Q1) with 5.3 gigawatts of renewable capacity, enough to power four million homes.

Enbridge pays shareholders an annual dividend of $3.66 per share. Despite a challenging macro environment, it increased distributable cash flow per share by 8% to $1.70 per share. Comparatively, it paid shareholders a quarterly dividend of $0.915 per share, indicating a payout ratio of just 54%. This provides the TSX energy giant with enough room to target acquisitions, increase dividends, and lower balance sheet debt.

Around 98% of Enbridge’s cash flows are contracted, while 80% of its EBITDA (earnings before interest, tax, depreciation, and amortization) has inflation protections, allowing it to generate cash flows across business cycles.

Enbridge is still among the best TSX dividend stocks to own in 2024. However, it is unlikely to replicate its historical performance in the upcoming decade. Here is one dividend giant I’d buy over Enbridge right now.

Whitecap Resources has a monthly dividend payout

Valued at $5.9 billion by market cap, Whitecap Resources (TSX:WCP) is an oil and gas company focused on the acquisition, development, and production of oil and gas assets located primarily in Western Canada.

Whitecap pays shareholders a monthly dividend of $0.061 per share, translating to a forward yield of 7.5%. It ended Q1 with a funds flow of $384 million or $0.64 per share. Comparatively, it paid shareholders a quarterly dividend of $0.18 per share, up 24% year over year.

In addition to its dividend hike, Whitecap Resources ended Q1 with a net debt of $1.5 billion and a debt-to-earnings before interest, tax, depreciation, and amortization of 0.7 times, which is reasonable.

Whitecap stock trades at 9.7 times forward earnings, which is really cheap. It’s also priced at a 35% discount to consensus price target estimates. After adjusting for its tasty dividend, total returns may be closer to 42% in the next 12 months.

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 Aditya Raghunath has positions in Enbridge. The Motley Fool recommends Enbridge and Whitecap Resources. The Motley Fool has a disclosure policy.

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