A Dividend Giant Canadian Investors Should Buy Over Enbridge Stock Right Now

A dividend giant is a better buy than a top-tier Canadian energy stock today.

| More on:
Man data analyze

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Dividend investing is a proven strategy to create passive-income streams and build retirement wealth. For other investors, dividend stocks are particularly beneficial in meeting urgent liquidity or financial needs.  

The TSX is home to established dividend giants, mostly industry leaders. Some of them are on a collision course to gain investors’ attention. But when BCE (TSX:BCE) and Enbridge collide, which stock would you buy?

Enbridge appears to have the edge because of its dividend-growth streak (27 years to 16) and year-to-date performance (+22.93% versus -4.01%). Also, the worst-performing sector (-3.48%) entering the fourth quarter (Q4) of 2024 is communications services (-3.48%). However, BCE is the better choice right now due to several attributes.

Created with Highcharts 11.4.3Bce PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Salient attribute

The most salient attribute of BCE is the critical nature of communications services. Telecommunications connect, communicate, and entertain. While telco stocks are volatile and affected by regulatory environments, the 144-year-old BCE stands strong against these headwinds. Enbridge is 75 years old.

Oligopoly

The telecommunications industry is capital-intensive, a major barrier to entry for competition, especially startups. BCE, along with TELUS and Rogers Communications, forms Canada’s telecom oligopoly. All three want to capture market share by offering high standards and advanced broadband communications networks and services.

BCE is the most dominant based on its $42.87 billion market capitalization. While Enbridge is TSX’s fourth-largest company ($120.9 billion), you have other investment prospects in the energy industry, including pipeline operators, oil & gas producers, and exploration & development companies.

Profitability record

BCE operates in a competitive landscape, but the mature company has maintained a good profitability record. The giant telco announced job cuts (around (9% of total staff) and reduced capital spending by more than $1 billion in 2024-205. According to management, the restructuring plan should improve free cash flow (FCF) in 2024 and then accelerate in 2025. BCE’s average net income in the last four years is $2.65 billion.

Latest financial performance

In the first half of 2024 (six months ending June 30, 2024), operating revenues slipped 1% year over year to $6 billion. However, net earnings jumped 52.1% to $604 million, while FCF increased 8.1% to $1.1 billion from a year ago.

Mirko Bibic, chief executive officer of BCE, noted the most intense competition on wireless and pricing in Q2 2024. He admits the sustained competitive pricing pressures affected top-line growth.

Falling interest rates and the rollout of 5G technology are tailwinds and could translate to recovery and capital appreciation for telco stocks, including BCE.

Dividend Aristocrat

BCE’s investor base is mainly income-oriented, no doubt. You’ll love this 5G stock for its dividend aristocrat status and hefty dividend yield. Suppose you choose today. BCE trades at $47 per share, while Enbridge costs $55.51. The energy stock’s dividend offer is 6.59% compared to the 8.49% yield of BCE.

The aggressive spending of BCE to upgrade its wireless network to 5G speeds is over. Management’s focus will now shift to cost control that aims to reduce the payout ratio to below 100% and make dividends safer moving forward.

Should you invest $1,000 in BCE right now?

Before you buy stock in BCE, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and BCE wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge, Rogers Communications, and TELUS. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

Asset Management
Dividend Stocks

How I’d Allocate $10,000 in 2 Canadian Growth Stocks for the Long Run

Both growth stocks offer a compelling mix of income, growth, and value, and I believe they can outperform over the…

Read more »

grow money, wealth build
Dividend Stocks

2 Dividend-Growth Stocks to Buy on the Pullback

These stocks have increased their dividends annually for decades.

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

BCE Stock Analysis: A Smart Choice for Potential Value and Income

BCE stock has slipped to its June 2009 level amid Trump tariff uncertainty and intensity. Does the sharp dip provide…

Read more »

Person slides down a stair handrail
Dividend Stocks

Should You Buy Cargojet Stock at $70?

Cargojet stock might be down, but don't let that scare you off. It's still a long-term opportunity.

Read more »

Middle aged man drinks coffee
Dividend Stocks

3 Monthly Dividend Stocks to Buy and Hold Forever

Add these three TSX dividend stocks to your self-directed portfolio for reliable monthly passive income.

Read more »

Hourglass projecting a dollar sign as shadow
Dividend Stocks

How I’d Build an Income Portfolio With 3 TSX Stocks Paying Monthly Dividends

Focusing on these three monthly paying TSX dividend stocks can help you reinvest more frequently, enhancing overall returns.

Read more »

Dividend Stocks

How I’d Divide $15,000 Across My Top 3 TSX Stock Picks for Growth and Income

Got $15,000? Here are three TSX stocks that could provide ample dividend and capital returns in the coming years ahead.

Read more »

concept of real estate evaluation
Dividend Stocks

Canadian Real Estate Stocks: How I’d Navigate This Sector With $15,000 During The Pullback

A $15,000 investment split among these two undervalued Canadian defensive REITs could generate high income yields with capital gains upside

Read more »